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Does the environment of the origin of a social responsible investment fund
have an impact on its performance?
Auteur : Samain, Eléonore
Promoteur(s) : Muller, Aline
Faculté : HEC-Ecole de gestion de l'ULg
Diplôme : Master en sciences de gestion, à finalité spécialisée en Banking and Asset Management
Année académique : 2015-2016
URI/URL : http://hdl.handle.net/2268.2/1805
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DOES THE ENVIRONMENT OF THE ORIGIN OF A SOCIAL RESPONSIBLE INVESTMENT FUND HAVE AN IMPACT ON ITS PERFORMANCE?
Jury : Dissertation by Promoter : Eléonore SAMAIN Aline MÜLLER for a master in Management Science Reader(s) : with a specialization in Banking and Virginie XHAUFLAIR Asset Management Philippe MACLOT Academic year 2015/2016.
Acknowledgement First of all, I would like to give the biggest thanks to Mrs. Aline Müller for the guidance and
help in this research work.
I also wish to express all my gratitude for my lecturers, Mrs Virginie Xhauflair and Mr.
Philippe Maclot for surrounding me with this work.
I would also like to thank all the people that took part directly, or indirectly, in the realization
of this thesis.
Executive summary The amount of asset invested in a socially responsible way is currently growing and is
expected to keep growing in the future.
Nevertheless, European countries are working differently in order to implement corporate
social responsibly and sustainability in their policies. The scope of this work focusses on 12
European countries : Austria, Belgium, Finland, France, Germany, Italy, Netherlands,
Norway, Spain, Sweden, Switzerland and the United Kingdom. In order to capture the
differences that exist between those 12 countries, an index will be created taking into account
elements that characterize the corporate social environment and social responsible investing
market on a national basis.
Therefore, based on that different levels of CSR and SRI implementation on a national basis,
we will try to analyze if the environment of the origin of a corporate social responsible
investment fund has an impact on its performance. In order to do that, a definition of the
origin of an SRI fund will be settled taking into account 2 different elements : the fund
management and more precisely, the place where the fund is domiciled and secondly, the
place where the head office of the management company is established.
Performance will be measured via the alpha and excess alpha generated by the fund manager.
1
Table of content List of abbreviations ......................................................................................................... 3 Introduction ...................................................................................................................... 5 Chapter 1: Investment funds ............................................................................................. 7
1.1. Definitions ............................................................................................................. 7 1.1.1. Undertaking for collective investments .......................................................... 7 1.1.2. Undertaking for collective investments in transferable securities .................. 7 1.1.3. Unit trust ......................................................................................................... 7 1.1.4. Open-ended investment company .................................................................. 8
1.2 European fund investment market .......................................................................... 8 1.3. Fund measures of performance.............................................................................. 9
Chapter II: Socially responsible investing ...................................................................... 11 2.1. Definitions ........................................................................................................... 11 2.2. Global SRI fund investment market .................................................................... 14 2.3. European SRI fund investment market ................................................................ 14 2.4. European SRI retail fund investment market ...................................................... 15
2.2.1. SRI investing strategies ................................................................................ 16 2.2.2 SRI Investors ................................................................................................. 17 2.2.3 SRI asset allocation ....................................................................................... 18
2.3 Socially responsible fund performance vs. Conventional fund performance ....... 19 2.4 Performance according to the strategy used ......................................................... 21 2.5 Country analysis of SRI implementation ............................................................. 24
2.5.1 Austria ........................................................................................................... 24 2.5.2 Belgium ......................................................................................................... 25 2.5.3 Finland ........................................................................................................... 25 2.5.4 France ............................................................................................................ 25 2.5.5 Germany ........................................................................................................ 26 2.5.6 Italy ................................................................................................................ 26 2.5.7 Netherlands .................................................................................................... 27 2.4.8 Norway .......................................................................................................... 27 2.4.9 Spain .............................................................................................................. 27 2.4.10 Sweden ........................................................................................................ 28 2.4.11 Switzerland .................................................................................................. 28 2.4.12 United Kingdom .......................................................................................... 29
Chapter III: Thesis purpose ............................................................................................ 31
2
Chapter IV: Index construction ...................................................................................... 33 4.1. Assessment method to evaluate the level of implementation of SRI on a country basis ............................................................................................................................ 33
4.1.1. Asset under management analysis ................................................................ 33 4.1.2. Legal/Regulatory framework ........................................................................ 34 4.1.3. National SRI Agency .................................................................................... 35 4.1.4. Number of SRI funds on a country basis ...................................................... 35 4.1.5. Index on CSR practices on a country basis .................................................. 36
4.2. Index of CSR practices on a country basis .......................................................... 41 Chapter V: Empirical Study ........................................................................................... 43
5.1. Data collection ..................................................................................................... 43 5.2. Observations ........................................................................................................ 44
5.2.1. Observations from global datas .................................................................... 44 5.2.3. Observation on a domicile basis ................................................................... 44 5.2.4. Observation based on a the head office of the management company of the fund ......................................................................................................................... 46
5.3. Preliminary analyses ............................................................................................ 47 5.3.1 Period analyzed.............................................................................................. 47 5.3.2 Return measure .............................................................................................. 47 5.3.3. Top 10 funds returns ..................................................................................... 47 5.3.3. Analysis based on the Alpha ........................................................................ 50 5.3.4. Analysis based on the Morningstar Sustainable Portfolio Score .................. 52
5.4 Excess alpha analysis............................................................................................ 56 5.4.1. Benchmark measure ..................................................................................... 56 5.4.2. Average analysis ........................................................................................... 56
5.4. Analysis between the performance and the country rating.................................. 57 5.4.1 Method used .................................................................................................. 57 5.4.2. Results obtained ............................................................................................ 58
5.5. Final results ......................................................................................................... 60 Chapter VI: Conclusion .................................................................................................. 63
6.1. Limitations and recommandations ...................................................................... 63 Bibliography ................................................................................................................... 65
3
List of abbreviations ALFI Association of the Luxembourg Fund Industry bn Billion CSR Corporate Social Responsability EFAMA European Fund and Asset Management Association ESG Environmntal, Social, Gouvernance GDP Gross Domestic Product GSIA Global Sustainable Investment Alliance ManCo Management Company NGO Non-Governmental Organisation OECD Organisation for Economic Cooperation and Development PRI Principle for Responsible Investment SRI Social Responsible Investing UCI Undertaking for Collective Investments UCITS Undertaking for Collective Investments in Transferable
Securities UK United Kingdom
4
5
Introduction Nowadays, global warming and other issues linked to human being evolution lead
sustainable development to become a global concern. Besides problems linked to
environmental and social concerns, the finacial crisis of 2007 and its disastrous
consequences led to a willingness of the financial system to pay attention to the impact
of investments on the worldwide well-being.
Therefore, investors are increasingly more expressing their willingness to invest their
assets in a socially responsible way. Indeed, the amount of assets invested taking into
account environmental, social and governance concerns as well as sustainable issues has
known a rapid growth since the early 2000.
Furthermore, industrialized countries also implement the debate on corporate social
responsibility, which is at the core of sustainaible development. At a European level,
countries are working differently in order to implement corporate social responsibly and
sustainability in their policies, regulations and legislations.
The scope of this work focusses on 12 European countries : Austria, Belgium, Finland,
France, Germany, Italy, Netherlands, Norway, Spain, Sweden, Switzerland and the
United Kingdom. In order to capture the differences that exist between those 12
countries, an index will be created taking into account elements that characterize the
corporate social environment and social responsible investing market on a national
basis.
Therefore, based on that different level of CSR and SRI implementation on a national
basis, we will try to analyze if the environment of the origin of a corporate social
responsible investment fund has a positive impact on its performance. In order to do
that, a definition of the origin of an SRI fund will be settled taking into account 2
different elements : the fund management and more precisely, the place where the fund
is domiciled and secondly, the place where the head office of the management company
is established.
Regarding the performance, it will be measured via the alpha and excess alpha
generated by the fund manager.
The thesis will be structured in 6 chapters. The first chapter will sum up the regulations
that are currently prevailing in the European market and will provide an overview of the
6
European investment fund market. The second chapter will define socially responsible
investing and ciphers the current state of the European SRI market. This chapter will
also provide an overview of the current debate that goes around the over- or
underperformance of socially responsible investment funds. Afterwards, the third
chapter will exhibit the theoritical framework underlying the origin of an investment
fund. Chapter 4 is devoted to the construction of the index that will capture the level of
CSR implementation and SRI integration in the national investment markets. In the fifth
chapter, the empirical study is conducted and will lead to the last chapter, in which are
stated the results obtained and final conclusions.
7
Chapter 1: Investment funds 1.1. Definitions
1.1.1. Undertaking for collective investments Undertaking for collective investments can be defined as:
« Structure or organization, for which the objective is to pool together money and savings collected from the public, for the purpose of investing in transferable securities or other assets, while sharing the costs and the profit (or even losses) of such investment, and whose management is entrusted to a professional in accordance with the risk spreading and diversification principle » (Sougné, 2016)
1.1.2. Undertaking for collective investments in transferable securities According to the directive 2009/65/ec set by the European parliament and the council of
13 July 2009, Article 1.2 defines UCITS and states that:
« For the purposes of this Directive, and subject to Article 3, UCITS means an undertaking: (a) with the sole object of collective investment in transferable securities or in other liquid financial assets referred to in Article 50(1) of capital raised from the public and which operate on the principle of risk-spreading; and (b) with units which are, at the request of holders, repurchased or redeemed, directly or indirectly, out of those undertakings’ assets. Action taken by a UCITS to ensure that the stock exchange value of its units does not significantly vary from their net asset value shall be regarded as equivalent to such repurchase or redemption. »
The product directive 2014/91/ec amending the legislation UCITS I clarified the
definition of transferable securities as:
« The term “transferable securities” now includes: “shares in companies and other securities equivalent to shares in companies (shares), bonds and other forms of securitised debt (debt securities), [and] any other negotiable securities which carry the right to acquire any such transferable securities by subscription or regulators and can only delegate to a qualified and 17 referred to in Article 21 [i.e., derivatives].” Thus, derivatives have been expressly excluded from the definition of “transferable securities.” »
1.1.3. Unit trust The Oxford English Dictionary (2016) defines a unit trust by the following way:
« An open-end collective investment fund which is priced, bought, and sold in units which represent a mixture of the securities which underlie the fund. »
8
1.1.4. Open-ended investment company An open-ended investment company is a type of open-ended collective investment
purposed to be sold in the United Kingdom. The collective investment structure invests
in other companies, based on an investment strategy. The share price is based on the
underlying assets in which the fund has invested in. In addition to this, it is possible for
the fund to adjust its fund size (Reilly & Brown, 2012).
1.2 European fund investment market According to the European Fund and Asset Management Association [EFAMA] report
(2015), out of the EUR 19 trillion assets under management of the European market,
investment funds represent 7,9 trillion AuM at the end of 2013. In terms of figures, UK,
France and Germany hold respectively 24%, 22% and 17% of the market share.
Nevertheless, the rest of Europe accounts for 31% of the market share. This large
amount represents countries where large investment funds are managed such as
Luxembourg or Ireland. Furthermore, all European countries have experienced an
increase of their assets under management from 2012 to 2013. Indeed, the AuM of
France rose by 15%, United Kingdom by 11% and Italy by 7%.
Now looking on a national basis, assets invested in investment funds represent 93% of
French GDP, 80% of the German GDP , and 70% for the rest of Europe. This shows the
ability that the asset managers of these countries have to attract assets coming from
abroad.
Table 1: Investment fund assets by geographical breakdown of AuM at end 2013 (EUR,
billion)
Countries AuM AuM %change Market Share AuM/GDP
UK 1,869 11% 24% 93%
France 1,699 15% 22% 80%
Germany 1,330 0% 17% 47%
Italy 263 7% 3% 16%
Belgium 104 1% 1% 26%
Austria 85 1% 1% 26%
9
Netherlands 69 1% 1% 11%
Portugal 19 4% 0.24% 11%
Turkey 16 13% 0.20% 3%
Hungary 16 33% 0.20% 16%
Greece 6 3% 0.07% 3%
Rest of Europe 2,407 13% 31% 70%
TOTAL 7,884 10% 100% 55%
The European fund market may be qualified as highly internationalized (European Fund
and Asset Management Association, 2015). Precisely, this means that funds can be
domiciled in one country, managed in a second and sold in a third, while basically,
funds are domiciled in one country in order to serve local players. In addition to this, the
European passport put in place for UCITS that foresees that a common EU investment
vehicle, established and regulated in one EU member state may be sold across the EU
without the need for further authorization by each EU member state, with only a
notification of intention to the market (Sougné, 2016).
1.3. Fund measures of performance Cogneau and Hübner (2009) provide to the literature a census of 101 performance
indicators in order to assess the performance of a portfolio. They analyze the strengths
and weaknesses of each measure and provide a classification based on their objectives,
properties and degree of generalization.
In the scope of this work, the performance of a fund will be assessed by the year-to-date
returns provided by Morningstar, while the sub-performance will be assessed taking
into account the S&P Europe 350 Daily RC 10% ER EUR index as measure for the
market performance.
10
0
50
100
150
200
250
7/21/11 7/21/12 7/21/13 7/21/14 7/21/15 7/21/16
Net
tota
l ret
urn
Figure 1 : S&P 350 Europe rc 10 EUR
11
Chapter II: Socially responsible investing 2.1. Definitions Renneboog, Ten Horst and Zhang (2008) give a definition of socially responsible
investing:
« SRI is an investment process that integrates social, environmental, and ethical considerations into investment decision making. Unlike conventional types of investments, SRI apply a set of investment screens to select or exclude assets based on ecological, social, corporate governance or ethical criteria, and often engages in the local communities and in shareholder activism to further corporate strategies towards the above aims. »
Bollen (2007) gives a more general definition of socially responsible investing: « Social responsible investing integrates personal values and societal concerns with the investment via shareholder activism, community investment and, most visibly, investing with social screens ».
In the absence of « standardized » definition for responsible investments funds, the
Association of the Luxembourg Fund Industry (KPMG & Association of the
Luxembourg Fund Industry [ALFI], 2015) provided a range of criteria defining a
responsible investment according to the underlying strategy for selecting securities of
the fund.
12
Figure 2: Criteria range defining SRI
Source : KPMG & Alfi, 2014
The ALFI classification is based on the 2012 Eurosif study. That study suggests
different approaches to responsible investing. The seven classifications are referred to
the different strategies used to manage funds.
The Eurosif European study (2014) describes and gives definitions for each possible
strategy:
1. « Sustainability themed : Investment in themes or assets linked to the development of sustainability. Thematic funds focus on specific or multiple issues related to ESG.
2. Best-in-class selection : Approach for which leading or best performing investments within a universe, category, or class are selected or weighted based on ESG criteria.
13
3. Norm-based sceening : Screening of investments according to their compliance with international standards and norms.
4. Exclusions : An approach that excludes specific investments or classes of investments from the investible universe such as companies, sectors or countries.
5. ESG integration : The explicit inclusion by asset managers of ESG risks and opportunities into traditional financial analysis and investment decisions based on a systematic process and appropriate research sources.
6. Engagement and voting : Engagement activities and active ownership through voting of shares and engagement with companies on ESG matters. This is a long term process, seeking to influence behavior or increase disclosure.
7. Impact investing : Impact investments are investments made into companies, organizations and funds with the intention to generate social and environmental impact alongside a financial return. Impact investments can be made in both emerging and developed markets, and target a range of returns from below market-to-market rate, depending upon circumstances. »
Furthermore, the responsible investing approaches provided by Eurosif are closely in
line with those provided by the Global Sustainable Investment Alliance [GSIA], the
Principle for Responsible Investment [PRI] and the EFAMA.
Table 2: SRI strategies denominations
Eurosif GSIA-Equivalent PRI-Equivalent EFAMA-equivalent
Exclusions ESG negative screening ESG negative/
exclusionnary screening Negative screening or
exclusion
Norm-based screening Norm-based screening Norm-based screening Norm-based approach
Best-in-class selection ESG positive screening
and best-in-class ESG positive screening
and best-in-class Best-in-class policy
Sustainability themed Sustainability themed ESG-themed investments Thematic investments
14
ESG integration ESG integration Integration of ESG issues -
Engagement and voting Corporate engagement
and shaeholder action Engagement (three types) Engagement (voting)
Impact investing Impact/community
investing - -
Source: Eurosif, 2014
2.2. Global SRI fund investment market According to the GSIA report (2014), the socially responsible investment assets have
known a large expansion in the recent years. Indeed, this amount increased from $13.3
trillion to a total of $21.4 trillion by the start of 2014 globally. This increase of interest
for socially responsible investments comes from the demand of individual and
institutional investors who want to fit their portfolio with their beliefs and the rise of
ethical consumerism, characterized by a situation where consumers are ready to engage
a higher premium to get products in line with their personal values (Renneboog et al.,
2008). Also, the change in regulation and the stronger measures in terms of disclosure
commitment regarding social, environmental and ethical information lead investors to
turn to a socially responsible way to invest their money (Hood, Nosfinger & Varna,
2013). The increasing interest for SRI can also be observed when a deeper look is given
to the proportion of assets managed. Indeed, the European level of SRI assets managed
relative to the total of assets managed increased from 49.0% in 2012 to 58.8% in 2014
(GSIA, 2014).
Regarding the country basis, the United States have known the largest SRI assets
growth between 2012 and 2014, expanding by 76%. United States is followed by
Canada and Europe, which respectively knew growths of 60 and 55% (GSIA, 2014).
2.3. European SRI fund investment market European Responsible investing fund survey, KPMG (2015) ciphers the European Fund
Market to 1,874 funds representing an AuM of 372,0 billion for the year 2014. The
responsible assets represent 3,3% of the total AuM of the European fund market, even
though this still represents a small amount relative to the total AuM of the European
fund market, it increases by 0.5% relative to 2012.
15
In terms of strategies, 87% AuM of SRI funds are used for positive or negative
screening rather than any particular investment theme. Indeed, thematic funds
(environmental, social, or ethical focus) account for 13% of the total AuM.
In addition to this, 2/3 of SRI funds involve positive or negative screening, while 1/3
are involved in thematic funds. Nevertheless, funds investing in environmental focus
remain the biggest proportion of thematic funds.
2.4. European SRI retail fund investment market Concerning the retail market in Europe, Vigeo (2013) provided an overview of the
European retail SRI investment funds. By the end of 2014, the European market
counted for 957 funds representing 127 billion of assets under management. The survey
led by Vigeo permit to highlight important trends of the SRI fund market. First, even
though the fact that the SRI retail market remains a niche, counting only for 1,7% of the
total European AuM, the market share is continually increasing showing the solid
interest of investors for SRI funds.
Second, concerning the number of funds available on the market, the market
experienced in 2012-2013 a slight decrease of the number of SRI funds available for the
European market. Nevertheless, the market experiences today a consolidated increase of
the socially responsible investment funds. France and Belgium remain the countries
with the highest number of funds. However, Norway, Sweden, Germany and the United
Kingdom have seen their number of funds decrease for the year 2014.
0,00
10,00
20,00
30,00
40,00
50,00
Figure 3 : Total asset under management for SRI retail funds domiciled in Europe, per country (end of june 2014,
EUR)
JUNE 2012
JUNE 2013
JUNE 2014
16
Third, the total amount of asset under management raised from 108 bn to 127 bn
between 2013 and 2014 showing a stable growth induced by an increase in the number
of subscriptions and improved market performances. On a country basis, France
remains the country managing the highest amount of assets. But while Belgium
accounts for a large number of funds, the amount of assets represent only 6% of the
total AuM.
2.2.1. SRI investing strategies Concerning the strategies used to the selection of SRI assets, it can be seen that the most
used is the negative and exclusion screening, closely followed by the integration criteria
strategy (Eurosif, 2014). Nevertheless, even though impact investing is the least used
159
280 313 354 375 388 437
537
683
879 886 884 922 957
0
200
400
600
800
1000
1200
1999 2001 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Figure 4 : Number of SRI retail funds, cumulated, in the period 1999 to 2014 (end of june 2014)
11.074 14.482 12.150 19.034 24.127 34.009
48.715 48.720 53.276
75.265 84.364
94.773 107.838
127.015
020.00040.00060.00080.000
100.000120.000140.000
Dec1990
Dec2001
June2003
June2004
June2005
June2006
June2007
June2008
June2009
June2010
June2011
June2012
June2013
June2014
Figure 5 : Total asset under management for SRI retail funds domiciled in Europe (end of june 2014, mn Euro)
17
strategy, it has known the largest growth, with a compound annual growth rate of more
than 52%.
2.2.2 SRI Investors Furthermore, SRI market is largely dominated by institutional investors (Eurosif, 2014).
Institutional investors are described as insurance or pension funds (Sougné, 2016) and
represent 96,6% of the invested amount of socially responsible assets. The growing
interest of institutional investors for SRI comes from the fact that these institutional
investors are becoming aware of a large literature showing that being involved in
corporate socially responsible investments can lead to superior economic and/or
financial performance through different mechanisms (Renneboog et al., 2008 ;
Kitzmueller & Shimshack, 2012).
48.046
283.081
2.132.394
3.584.498
3.164.066
1.762.687
8.750
58.961
353.555
3.633.794
6.853.954
5.232.120
3.275.930
20.269
0 2.000.000 4.000.000 6.000.000 8.000.000
Sustainability Themed
Best-In-Class
Norms-based screening
Exclusions
ESG Integration
Engagement and voting
Impact Investing
Figure 6 : Growth of SRI stragtegies in Europe (EUR)
2013
2011
8,00% 5,90% 3,40%
92,00% 94,10% 96,60%
0,00%
20,00%
40,00%
60,00%
80,00%
100,00%
120,00%
2009 2011 2013
Figure 7 : SRI Investors (2009-2013)
Institutional
Retail
18
2.2.3 SRI asset allocation Equity funds dominate the SRI market at the European stage. Indeed, equities account
for about the half of the asset under management in december 2013, against 33% for
2009. With regards to bonds, their allocation decreased from 53% in 2009 to 40% in
2013.
Minutely, allocation of bonds can be broken down for 2013: 21.3% invested in
corporate bonds, 16.6% in sovereign bonds and 1.4% in supra national bonds. (Eurosif,
2014)
0
20
40
60
80
100
120
Figure 8 : European SRI asset allocation (2013)
Monetary/Deposit
Alternative
Bonds
Equity
Corporate bonds; 21,3%
Supranational bonds; 1,4%
Sovereign bonds; 16,6%
Local/municipal bonds; 0,8%
Figure 9 : Breakdown of European SRI Bond assets (2013)
19
2.3 Socially responsible fund performance vs. Conventional fund performance A large number of empirical studies have been led for both individual countries and
multi-countries, in order to assess and compare the performance of SRI funds with non-
SRI funds.
Results have shown that taking into account ethical, social and corporate governance
does not have a significant impact on a fund performance. More precisely, performance
of social responsible fund is not significantly different from that of non-SRI ones.
(Hamilton, Jo & Statman, 1993 ; Goldreyer & Diltz, 1999 ; Statman, 2000 ; Bauer,
Koedijk & Otten, 2005 ; Scholtens, 2005 ; Gregory & Whittaker, 2007 ; Leite &
Cortez, 2014)
Cortez, Silva and Areal (2012) came to criticism by saying that some problem can be
highlighted from the different methodologies used to achieve empirical studies. First,
studies used CAPM based measures of performance. These measures are inappropriate
and induce a lack of consideration of risk factors such as : size, book-to-market value
and momentum (Renneboog et al., 2008). Secondly, Cortez et al. (2012) states that
small size bias remained uncovered and that a multi factor model would be a better tool
to assess the performance of SRI funds. Indeed, SRI funds are more exposed to small
capitalization companies (Luther, Matatko & Corner, 1992), these biases seem to be
even more accentuated for European SRI funds than the US ones (Schröder, 2004). A
growth bias may also be established in the literature. These biases may be due to the
fact that value stocks are more risky in term of environmental concerns and, hence, less
integrated in SRI funds (Bauer et al., 2005). Thirdly, Renneboog et al. (2008) insisted
on the fact that SRI fund performance comparisons are difficult to establish due to the
use of relatively small samples and different samples and benchmarks.
Nevertheless, there are two literary movements that can be retrieved from the current
state of literature concerning the viability of socially responsible investment projects.
The first theory stated by the advocates extoll the fact that though a screening process,
qualitative management filters would allow investors to select investments that are in
line with their beliefs and values but also, the filters would allow the selection of
companies with good management skills and would therefore lead to higher risk-
adjusted returns. (Sauer, 1997 ; Bollen, 2007).
20
This idea can be backed by the « good management theory » stated by Waddock and
Graves (1997) which states that there exists a positive relationship between good
management and corporate social performance and by the « stakeholder theory »
disclosed in 1984 by Freeman which states that the inclusion of all the stakeholders in
the decision making process of a firm should lead to a better shareholder satisfaction by
creating value for them, and that the performance of a firm could increase its financial
performance thanks to a better score in the social responsibility dimension of the firm.
In addition to this, Gollier and Pouget (2014) asserted that general positive abnormal
returns can be generated by activist investors who turn non-responsible companies into
responsible ones. This fact is more commonly named as « shareholder activism ».
Furthermore, market information inefficiencies create opportunities for investors to
create outperformance by selecting securities for which misinformation would lead to
misprizing.
Nevertheless, Nosfinger and Varma (2014) affirmed that SRI funds experienced
outperformance during economic crises times. This outperformance is mainly driven by
positives screening and more precisely by those related to environmental, social and
corporate governance issues. In the opposite, SRI funds determined thanks to negative
screening techniques do not experience outperformance. By the way, SRI investments
offer additional protection to investors in times of crises by weakening the downside
risk.
Furthermore, during market downturns SRI and conventional funds tend to exhibit
similar investment types while good economic state tend to be characterized by
significant different risk exposure (Leite & Cortez, 2014).
The second point of view that is stated in the literature about SRI fund performance tend
to more negative (Sauer, 2007 ; Bollen, 2007)
Screening necessary to the selection of stocks composing a fund lead to constraint
portfolio optimization. According to Markowitz (1991), the use of a restricted universe
leads to an inability to properly diversify a portfolio. Hence, the impact on the risk-
adjusted performance of funds would be negative. Indeed, extra-financial screening is
detrimental to the diversification principle of the capital asset pricing model because
SRI screening takes into consideration the specific risk of firms. This results in filtered
universe that is a subgroup of the available universe. Also, SRI mean-variance frontiers
21
would be, in the best case, equal to the total mean-variance frontier. (Bertrand &
Lapointe, 2015)
In addition to this, SRI screening may lead to higher financial costs having a negative
impact on a fund’s performance. Geczy, Stambaugh and Levin (2003) show that there
was a financial cost of SRI screens on mean-variance optimizing investors that can be
substantial. Specifically, the SRI constraints impose a cost of more than 1.5% per month
on investors believing in asset selection skills.
An other element that can be stated against the sub-performance of SRI funds is linked
to the consideration of the market as being efficient, specifically, that the pricing of a
stock integrates quickly relevant information (Fama, 1970). Flammer (2015), asserts
that the value-relevant information is well integrated in the price and that it is not
possible to benefit from misprizing opportunities. Therefore, for firms highly involved
in CSR practices, returns obtained correspond to the level of systematic risk.
In addition to this, expected returns expected by CSR firms should be lower because
these firms simply experienced lower risk (Barnett & Salomon, 2006).
Therefore, the two literary movements support empirical results that shows that
integrating ethical, social and corporate governance features in a portfolio does not have
a significant impact on a fund performance.
2.4 Performance according to the strategy used Literature authors also focused on the link between the performance of a socially
responsible fund and its underlying strategy.
Indeed, Cortez et al. (2014) state that
« the absence of significant performance between SRI funds and conventional funds may be related to the use of best-in-class strategies ».
Hence, the performance and the risk exposure associated with SRI funds with a best-in-
class approach will differ from the performance given by a fund using simply positive
or negative screening. The result of the study led by Cortez et al. (2014) showed that
SRI funds based on a best-in-class strategy are significantly less impacted to momentum
and to small capitalization but more involved in local securities.
Indeed, strategies chosen by fund managers are different across geographical areas. In
the US and in UK, SRI funds are mainly based on negative screening while Continental
Europe is more focused on positive screening (Renneboog et al, 2008). Furthermore,
22
Capelle-Blancard and Monjon (2014) showed that Europe favors the best in class
strategy. This assertion goes in line with the Eurosif (2014) study (see infra).
In the opposite, it has been shown by Goldreyer and Diltz (1999) and Nosfinger and
Varma (2014) that the underlying strategies picked by fund managers to undertake the
screening process necessary to the creation of SRI funds, does not impact its
performance differently. Nevertheless, these two studies extract their sample from US
fund market.
With regards to the continental Europe, Capelle-Blancard (2012) found a negative
relationship between screening intensity and fund performance. Specifically, sectoral
screening should decrease financial performance while transversal screens have no
impact.
Also, according to Cortez et al. (2014), it would be possible to reduce the loss resulting
from a lack of diversification by using a best-in-class strategy. Indeed, best-in-class
strategy would allow to reduce the sector bias involved by the fund manager when
negative screening is used.
In an empirical point of view, several authors get down to find a relationship between
performance and SRI screening methods and intensity.
First, Renneboog et al. (2008) found a negative relationship between the number of
screenings operated by fund managers and the financial performance of the fund. Also,
they found that the number of environmental, ethical and sin screens do not have a
significant impact on the fund’s performance. As for them, Barnett and Salomon (2006)
found a curvilinear relationship between screening intensity (measured by the number
of screens used) and financial performance. A curvilinear relationship means that, at
first, financial performance will decrease as the number of screening factors increases
but, as the number of screening factors reaches its maximum, performance turns out to
be positive. In addition to this, in line with the results retrieved by Capelle-Blancard and
Monjon (2014), Barnett and Salomon (2006) found that performance was positively
affected by community investments screens but negatively affected by environmental
and labour relations.
Laurel (2011), worked on a sample of European SRI funds and found that screening
intensity and strategies had no impact on performance while they had an inverted-U-
shaped impact on risk. In the same order of idea, Lee, Humphrey and Benson (2010)
23
found that increasing the number of screening factors decreases the level of systematic
risk even though performance was negative.
As for the relationship between conventional fund performance and SRI fund
performance, literature does not provide a clear statement concerning a possible
implication of SRI screenings on SRI funds performance.
24
2.5 Country analysis of SRI implementation Guler, Guillen, & MacPherson (2002) state that the diffusion of organizational practices
tend to be uneven across countries. Indeed, there is no reason that CSR practices escape
from that pattern Gjolberg (2009). Eventhough CSR has become a global phenomenon
during the last century (Mermod, Idowu, 2013), Matten and Moon (2008) argue that
there exist national differences among countries. Precisely, these differences may be
driven by the different evolution of the national institutional frameworks experienced by
the different countries. Indeed, institutional framework evolution results in evolutions of
national political systems, financial systems, education and labor systems and cultural
systems.
Going further, Lopez-Arceiz, Bellostas-Perezgrueso & Moneva (2016) assert that there
exists no universal ethical framework or social responsibility. Precisely, a socially
responsible mutual fund should be developed based on the cultural environment in
which it operates. Indeed, the behavior of the manager of this mutual fund is influenced
by the prevailing ethical framework of its origin country.
Gjolberg (2009) tried to highlight the fact that CSR practices and performance may
differ according to countries, and more precisely by national features. Therefore, the
different practices between countries would lead corporations to integrate CSR
differently according to these different features. In the continuity of this idea, Gjolberg
(2009) tried to build an index that would measure CSR activity on a national basis.
In addition to this, the Eurosif study (2014) and Vigeo analysis (2014) give an overview
of the CSR features and SRI practices put in place in 13 European countries.
2.5.1 Austria The Austrian SRI market showed a strong development during the recent years. Its
volume has been multiplied by 5 since year 2005. Indeed, Austria’s society is
particularly attached to ethical values and open towards sustainability issues and ideas.
Exclusion and normed-based strategies are the most used strategies, but each strategy
knew a double-digit growth between 2011 and 2013. Austrian asset allocation is
concentrated mainly around fixed income.
Austria proves to have an increasing asset trend with a market concentrated mainly
around big players.
25
2.5.2 Belgium In Belgium, Asset under Management was impacted during the crisis but rebounded in
2013. Nevertheless, SRI assets did not seem to benefit from that recovery, probably
because of the collapse of the capital-protected products.
Regarding the Belgian market place, it was one of the first to be active in responsible
investing and sustainability and nowadays, is, in term of investing strategy, involved
mainly in exclusions. In the future, several political initiatives may boost the Belgian
demand for SRI products.
Belgium launched new funds which are contributing to a 13% asset increase, invested
quasi equally between equity and fixed income. In addition to this the Belgian market
accounts for 214 SRI funds.
2.5.3 Finland Compared to its counterpart’s Nordic countries, Finland is a new entrant in the socially
responsible investment world. Nevertheless, the recent and rapid growth of signatories
and members of the Finnish for the UN-backed PRI have showed strong interest for
SRI.
Contrariwise, Finnish legislation does not cover SRI practices and pressures from
NGOs and media to encourage institutional investors to invest in a sustainable way are
low. And that, even though Finland records high scores in development indexes (i.e.
corruption perception, freedom of the press, equality and diversity), which could let
argue that Finland is implanted in CSR and more precisely in SRI in a natural way. In
terms of strategies used, the most popular is the Exclusion strategies and the ESG
Integration is the one that recorded the fastest growth in 2013.
Asset allocation of Finland can be broken down mainly in equities (49%) and bonds
(38%).
2.5.4 France France has one of the most developed SRI market across Europe. France accounts for
35% of the total continental assets. French market is concentrated around big players.
Indeed, France is accounting around 50 industry players. In terms of strategies, Best-In-
Class and Sustainability themed strategies has always been the most popular approach,
but Exclusions are increasingly applied by SRI managers while Norm-Based and
engagement continue to grow. In addition to this, SRI assets grew by 66,3% between
26
2011 and 2013. Concerning the regulatory framework, French companies are now
encouraged by the French government to introduce an employees’ representative at the
board in order to foster employees’ implication in large companies’ strategies. In
addition to this, the french government has announced in 2013 its willingness to launch
an « SRI label » that would allow an increase in the visibility and knowledge of SRI
funds among retail investors.
2.5.5 Germany Best-in-Class and Exclusions are both the most popular strategies for Germany. On the
legal framework, Germany’s situation changed a lot between between 2011 and 2013 :
the Act for Renewable energies to promote the energy regulation was putted in place
and provides incentives to investors. In addition to this, as France, Germany is willing
to implement a SRI label, which will contribute to a higher quality for SRI. With
regards to the legal framework, Germany introduced disclosure requirements for
institutional and big companies who dresses ethical, social and environmental concerns.
Concerning the regulatory framework, « soft SRI guidelines » exists in Germany, this
consist in 800 criteria presented in 1987 who had an important role for the development
of the SRI market. This guideline is still widely used and respected as it is said to be the
most comprehensive SRI criteriology. Therefore, the view concerning the future of the
German SRI market is positive: market will continue to grow and institutional investors
will play an important role in this growth. German assets are quite well distributed
between equity and balanced allocations and their offer of funds is increasing.
2.5.6 Italy Italy has a regulatory framework that is well advanced in the European social
responsible context and experienced an increase of 40% in terms of SRI assets. The
potential of SRI products is underestimated by Italian asset managers and the legislator
mainly focused on the transparency of investment processes. In addition to this, Italian
government lacks of a precise definition of what SRI is and this creates a
misinformation with regards to the investors, and therefore reducing the number of
potential investments.
Exclusions and normed based are the most popular SRI strategies for Italy, the use of
both strategies is influenced by SRI strategies adopted by big insurance and asset
manager players. Even if the Italian SRI market is led by a large amount of institutional
27
investors that show the most promising growth for the market, the implementation of
SRI strategies is still not effective. The practice of Italian market is still no widening
trough innovative and sustainable-oriented practices.
2.5.7 Netherlands Netherland has for long applied SRI principles in its investment practices. Indeed,
consumers are asking for regulatory frameworks. Consequently, there exists several
regulatory frameworks that show the willingness of the government to
implement socially responsible behaviors: banning for investments in clusters
munitions, the pension Governance code giving a guidance on important themes like
transparency, accountability and communication, financial control, diversity and
professional and competent governance. Also the « Wet Verstreking
Pensioenfondbestuur » aims at increasing transparency, security and knowledge
regarding pensions in the Netherlands.
Besides, Netherlands realized a rise in its assets of 17%, putting the country at the
foreground of the European scene, investing mainly in equities.
With regard to the strategies used, Netherlands mainly invest via Exclusions and Norm-
Based screening.
2.4.8 Norway Norway is considered to be historically one of the first countries to take into account
responsible investing considerations on its investments policies. Indeed, Norway fund
managers are among the most active in the Nordic region when it comes to the
promotion of SRI. The Norwegian Government Pension Fund Global heavily
influences the Norway market. This fund serves as a model role for asset managers and
investors in both Norway and abroad. This fund defines the Norway SRI market in
terms of guidelines and investments approach. Due to the predominance of this fund in
the market, any legal or regulatory framework is explicitly determined by the
government.
Even though Norway is considered to be a small player at a European level, its SRI
assets increased by 31% using in majority normed-based and exclusion strategies.
2.4.9 Spain After two years of recession for the Spanish economy, it started to slowly recover by the
28
half of 2014. In this economic context, Spanish investors start to consider SRI as an
alternative to traditional investment options. Thanks to the recovery of the asset
management industry and the stock markets, the interest of assets managers, asset
owners and investors for SRI products may only grow in the future. However, the
market is currently still very small and the regulatory framework is less developed than
in other European markets. Almost all SRI Spanish assets are invested based on the
Exclusion principle.
2.4.10 Sweden Sweden SRI market can be characterized as mature, with SRI policies being formally
integrated by experienced management and most large players.
Indeed, it has been 10 years that most important asset managers are active in socially
responsible investing. Maturity of the market causes the asset offering of the Swedish
market to be similar for a number of national players.
Whereas, SRI practices in Sweden are not governed by any explicit legal framework,
SRI investments relies on different initiatives such as United Nation Principles for
Responsible Investments.
The Swedish market is characterized by the use of strategies as norms-based and
exclusions, investing namely in equities. In addition to this, Swedish SRI market should
continue its growing trend. This predictions is believed thanks to the rise of green bonds
and more elaborated strategies that should lead to move SRI to become evermore
mainstream.
2.4.11 Switzerland Switzerland is the number one financial center for cross boarder wealth management
but also a financial global leader. In addition to this, Switzerland includes sustainability
in its constitution and is considered as a major actor of socially responsible investing.
Therefore Switzerland is able to offer to its customers a great variety of SRI products
and services.
Regarding the market size, a robust growth of the swiss SRI market was experienced for
the last two years, with higher growth rate for Exclusion, Integration and Engagement
strategies. With its characteristic to be a diversified financial place, suggesting
diversified options to companies and organizations, the Swiss players will allow to the
29
sustainable swiss financial center to go further in sustainable investing. A growth of the
Swiss SRI market is therefore expected in the future.
With regards to the legal and regulatory framework, Switzerland offer incentives for
companies who actively work to reduce C02 emissions. The country also initiated the
« Fat Cat Initiative », an initiative in which pension funds have to actively exercise
their voting rights at AGMs of Swiss companies on behalf of their members. Swiss also
decided to ratify the International Clusters in Munitions thanks to a ban to invest
directly or indirectly in weapons.
2.4.12 United Kingdom United Kingdom is a financial center that benefits from a large expertise in terms of
product types, asset classes and target market. In addition to this, the United Kingdom
are also a leading player concerning sustainable and responsible finance.
Because UK are a reference domicile for NGOs and leading SRI actors, it can provide
to clients a large analyst coverage of SRI products nationwide.
The most practiced strategy in terms of AuM for the UK are Engagement and voting,
closely followed by ESG Integration. Indeed, the UK introduction of a regulatory
framework that makes compulsory the reporting of green gas emissions for companies.
A regulatory framework also pushes charities to consider ethical values in their
investments policies.
In the future, the UK legal framework is supposed to support the growth of the UK SRI
market and in the long run, SRI should become a norm.
30
31
Chapter III: Thesis purpose The purpose of this thesis is to analyze the impact of the CSR environment of a SRI
fund on its performance.
The first problematic will be to classify cultural zones across Europe according to their
levels of implementation and incorporation of CSR criteria on local places. In order to
find a solution to this problem, an index will be created in order to assess and cipher
that level of implementation on a country basis.
After that, the empirical study will try to analyze and compare the empirical with the
theoretical results. In order to do that, a definition of the provenance of an SRI fund will
be settled taking into account 2 different elements : the fund management and more
precisely, the place where the fund is domiciled and secondly, the place where the head
office of the management company is established, from which emanates the corporate
culture of a fund.
Indeed, based on the results of Lopez-Arceiz, Bellostas-Perezgrueso & Moneva (2016)
which assets that, the domicile of an investments fund is important because:
« A mutual fund’s behavior will reflect the dominant ethics of the location where it is settled because the fund’s managers will assume the society’s prevailing values as their own. ».
And there exists a large literary movement that tries to highlight the impact of corporate
governance on a firm. Briefly, Gottesman and Morey (2012), Chan and Cheung (2012)
and Sorensen (2002) allow to sum up the current major literary trends.
Gottesman and Morey (2012) give a precise definition of strong corporate culture for
investment funds and state that a fund with a strong corporate culture can be doubly
qualified. First quality goes in line with the employee satisfaction. Employee
satisfaction may be explained as situations in which employees are mentored by
management, rewarded for work performance and their opinions and points of view are
taken into consideration in the decision making process. Funds that generally have a
strong corporate culture are able to attract and retain the top employees who will be
working harder than they would in a fund with a weaker corporate culture.
Hence, funds with poor corporate governance experience a higher employee turnover
that may negatively impact the fund’s performance.
32
The second quality exposed by Gottesman and Morey is that fund with strong corporate
culture tend to drive their decisions and practices on investors rather than sales. More
precisely, this means that the fund’s governance focus on shareholders’ satisfaction.
This customer satisfaction goes through high level of communication about strategies to
the shareholders of the fund. Indeed, according to Chan and Cheung (2012) integrating
cultural dimensions, ethical sensitivity, and corporate governance would lead
corporations achieving high corporate governance to experience higher expected return
on equity.
In addition to this, Sorensen (2002) found pro’s and con’s to the integration of a strong
corporate culture.
He mentions 3 positive reasons to the implementation of a strong corporate culture.
First, thanks to a strong corporate culture, coordination and control within the firm are
improved. Second, it allows to align firm’s goals with employees’ goals. And thirdly,
strong corporate culture increases employees efforts and motivation, because employees
feel that they are making a difference in the firm. Specifically, they experience the
sentiment to be recognized for to work they achieved, for their contribution and feel
involved in the decision making process of the firm.
Nevertheless, high corporate culture is highly expensive to implement. De facto,
implementation of monitoring and development represents high costs for a fund and,
hence, in market downturns, dedicated budget will be reduced.
In addition to this, in hard times such as market crises, when the market volatility is
substantial, there is an inability for these firms to change rapidly. In other words, firms
with a strong corporate culture underperform when market volatility is high.
33
Chapter IV: Index construction 4.1. Assessment method to evaluate the level of implementation of SRI on a country basis In order to assess how the 12 European countries implement corporate social
responsibility, and more particularly social investing nationally, an index has been
constructed. It takes into consideration the following elements: the amount of assets
managed in a socially responsible way, the fact that legal or regulatory framework exist
in the country and the fact that countries have a national SRI agency. These 3
information were provided by the Eurosif study (2014).
The number of retail funds held by each country, based on the study realized by Vigeo
(2014), was also taken into account to realize this index. In addition to this, an index
proposed by Gjolberg (2009) which tries to capture the most CSR involved countries
was integrated in the index calculation.
For practical purpose, each data has been recalculated on the basis of 100 and then
aggregated in order to provide a unique measure.
Appendices 1 to 7 provide complementary information to this chapter.
4.1.1. Asset under management analysis The European SRI study (Eurosif, 2014) provides an overview of the SRI framework on
a country basis and notably the amount of asset managed for each country within the
socially responsible framework. Going further, they provide the AuM for each country
according to the strategy used. The graph below represents the total AuM for 12
European countries in Euro.
The country that has the highest amount of assets invested in a socially responsible way
is the United Kingdom. Indeed, the UK assets under management represent 26% of the
total AuM invested for the countries covered. The second country which holds the most
assets are the Netherlands, closely followed by France, representing around 20% of the
total of assets managed. Going further, Norway and Sweden hold AuM around EUR 1.8
million, accounting respectively for 13% and 12% of the total AuM. Austria, Belgium,
Finland, Switzerland and Spain, hold less assets, with a percentage of less than 2% of
the total AuM.
34
4.1.2. Legal/Regulatory framework The Eurosif study (2014) suggests an overview of the SRI framework for European
countries. Within this analysis, the study analyzes legal and regulatory frameworks for
each country. A score of 100 was added to countries detaining an explicit legal
framework concerning SRI and CSR legislation on a national basis. Norway, Finland
and Sweden experience a score of 0 due to the fact that they don’t have any explicit
legal framework but they are rather based on CSR practices and initiatives led by
external actors such as UNPRI. Other countries obtained a score of 100.
19.750 320.221
257.085
2.264.609
78.312
941.577
2.698.999
1.851.410
125.152
1.725.586
131.307
3.660.117
0,00
500.000,00
1.000.000,00
1.500.000,00
2.000.000,00
2.500.000,00
3.000.000,00
3.500.000,00
4.000.000,00
Figure 10 : Total SRI AuM per country (2013, EUR)
35
4.1.3. National SRI Agency The following table resumes the notional SRI agency for each of the 12 European
countries analyzed. Each country implemented a national forum in order to tackle
socially responsible issues and promote socially investing. The only country that does
not benefit from this initiative is Belgium, therefore a lower score was attributed to
Belgium for this framework. (Eurosif, 2014)
Table 3 : SRI National agencies
Country National SRI Agency
Austria FNG (Forum Nachhaltige Geldanlagen)
Belgium —
Finland Finsif
France Novethic - Forum pour l’investissement responsable
Germany FNG
Italy Forum per la Finanza Sostenibile
Netherlands VBDO (Vereniging van Beleggers voor Duurzame Ontwikkeling)
Norway Norsif
Spain Spainsif
Sweden Swesif
Switzerland FNG
United Kingdom UKSIF
FNG, is not a national SRI agency but rather an association that promotes sustainable
investing in Germany, Austria and Switzerland.
4.1.4. Number of SRI funds on a country basis As stated infra, Vigeo (2014) provides literature with an analysis of the SRI fund market
available for retail investors. Nevertheless, the study realized by Vigeo did not provide
information for Finland. France and Belgium are the countries that hold the largest
36
number of funds, followed by Germany, Switzerland and the United Kingdom. Italy and
Spain are the bad players, having less than 20 socially responsible funds.
Their results can be sum up on this graph:
4.1.5. Index on CSR practices on a country basis In order to provide an appropriate measure that defines the level of implementation of
the socially corporate culture of a country, it is necessary to assess several factors.
Indeed, the analysis realized by Gjolberg (2009) provides indexes allowing to assess
CSR practices at a country level. Their purpose was to answer the following question:
« Which countries have the largest share of companies active in CSR, and how can CSR activity be measured on a national basis? »
By identifying the nationality of the companies who have adopted or qualified for
major, global CSR initiatives or CSR ratings, the index of CSR practices was
constructed for 20 OECD nations.
Based on 9 CSR initiatives, the index represents over- or under representation in CSR
indicators relative to the size of their economies.
0
50
100
150
200
250
300
Figure 11 : Number of SRI funds per country (2013)
37
The 9 CSR initiatives and their associate purpose that have been taken into
consideration in this study are the following (based on their purpose):
Table 4: CSR initiatives ranked according to their purpose
Purpose Initiative
Ratings based on SRI investment
criteria
Dow Jones Sustainability index,
FTSE4Good, « the Global 100 most
Sustainable Corporations »
Membership in CSR communities UN Global Compact, World Business
Council fot Sustainable Development
Sustainability Reporting Practices KPMG Sustainability Reporting
practices, Global reporting initiative
Certification Scheme ISO14001
The aim of the index is to give a measure of corporate practices and activities in the
CSR field. More precisely, the index is based on 9 CSR initiatives covering
sustainability reporting, membership in CSR organizations and networks, certifications
practices as well as different ranking of CSR performances along the triple bottom line
(ie. People, Profit, Planet).
The index was calculated by the following way:
∑( )
( )
The result of the study shows that Switzerland has the higher score and is closely
followed by Nordic countries. France and Spain experience low scores but these scores
are nevertheless positive while the scores of Belgium, Germany, Austria and Italy are
negative.
Ratio of country A’s over-/ under-representation on all 9 initiatives
38
In addition to this, initiatives may be discerned as being result-oriented or process-
oriented. These two types of initiatives may be defined, according to Gjolberg (2009),
by:
« Result-oriented initiatives are more focussed on demonstrable performances. The result oriented requires documented CSR achievements, are often narrowly directed towards business, and consist only for companies ». « Process-oriented initiatives: focus on participation, continuous improvement and learning processes. Often, these initiatives are multi-stakeholder based where NGOs, academia, governments or other social actors participate alongside companies »
A second dimension takes into account the barriers to entry for the nine CSR initiatives:
hard versus soft requirement. Analytical value of these dimensions appears when they
are combined.
-10
-5
0
5
10
15
Figure 12 : Index of national CSR practices, total score per nation
39
Table 5: The two dimensions of CSR initiatives
Hard requirements Soft requirements
Result oriented DJSE
FTSE4Good
Global 100 Most
Sustainable Companies
Sustainability 100 Best
Reports
KPMG Reporting Survey
Process oriented WBCSD
ISO14000
Global Compact
GRI
Therefore, the study also provides two indexes taking into account the sorting of the 9
CSR initiatives: results-oriented initiatives with hard requirement and process oriented
initiatives with soft requirements.
Initiatives which most closely reflect actual CSR performance are the result-oriented
CSR initiatives with hard requirements. If we separately study these initiatives, the
results clearly change.
Indeed, for result-oriented with hard requirement, Switzerland and the Nordic countries
remain at the top of the ranking. Nevertheless, Nordic countries experience slightly
lower scores. In addition to this, the United Kingdom reaches the second place, perhaps
indicating a preference in British companies for the more advanced, performance-based
CSR initiatives that require demonstrable results. France and Spain experience the
biggest move down in the index. This may be induced by the fact that France and Spain
are more involved in process-oriented initiatives, showing therefore negative scores.
40
For process-oriented variables with soft requirements, Spain shows indeed a higher
score, proving that Spain, focus on participation, continuous improvement and learning
processes. In addition to this, France and Austria experienced negative scores in the
scope of result-oriented with hard requirements; they prove to have positive scores
when only process-oriented initiatives with soft requirements are taken into account.
Therefore, the study shows that easy access initiatives result in country scores, which
are diametrically opposed to the scores obtained for the demanding initiatives.
-8
-6
-4
-2
0
2
4
6
8
Figure 13: Index of the most demanding CSR initiatives, country ranking
-1,5-1
-0,50
0,51
1,52
2,53
3,5
Figure 14 : Index of the least demanding CSR initiatives, country ranking
41
4.2. Index of CSR practices on a country basis The purpose of creating a new index was to understand which of the 12 analyzed
European countries implement corporate social responsibility and sustainable criteria in
their investments based on several elements, to provide a complete scheme of the CSR
framework on a country basis.
Switzerland and France are, according to the results, the countries that implement the
best corporate social responsible criteria and socially investing in their culture.
For France, this high score is mainly due to a large amount of assets managed in a
socially responsible way. France is also the country that exhibits the largest number of
SRI funds (Vigeo, 2013). With regards to Switzerland, its high score is derived from the
high score provided by the indexes proposed by Gjolberg (2009). United Kingdom
states at the third place. Even tough UK holds the highest amount of social responsible
asset under manegement and a high index of CSR practices, UK states only at the third
place because of its low number of SRI funds. The Nordic countries and the
Netherlands experience score above the average. The average score of Sweden and the
Netherlands is induced by a low number of SRI funds. Norway and Finland, which also
exhibit a low number of SRI funds (Information non available for Finland), are also
disadvantaged by the fact that the country still not have an explicit legal framework.
Spain stands at the 8Th place, despite the fact that it holds the first place in the index for
the least demanding CSR initiatives. And finally, Belgium, Germany, Austria and Italy
stand at the bottom of the ranking with scores between 25 and 40.
For practical purposes, this index of CSR practices on a country basis will be called
“country rating”.
42
0
10
20
30
40
50
60
70
Figure 15 : Final country index
43
Chapter V: Empirical Study 5.1. Data collection The scope of this thesis is about socially responsible funds. Morningstar provides to
investor a way to invest their money in a sustainable way thanks to the « Morningstar
Sustainable Rating » system . This rating system provides investors a way to evaluate
and compare funds based on sustainable investing principles. The rating is based on the
Morningstar Sustainable Score which is calculated on the basis of a weighted average of
the ESG scores obtained by the fund, after deducting for the companies involved in
controversy topics. The rating was created for investors willing to integrate
environmental, social, and governance or ESG criteria in their portfolio which goes in
line with the definition provided by Renneboog et al. (2008) of socially responsible
investing and is based on analysis provided by Sustainalytics, a major ESG researcher.
In addition to this, the data set only takes into consideration open-ended funds.
Precisely, open-ended funds are funds that, according to the Oxford English Dictionary
(2016):
« Denoting a type of unit trust or fund in which the managers may move investments from one security to another without notifying the unitholders. Also (chiefly Brit.): denoting a type of fund in which there is no fixed number of units »
The rating is constructed by the following way: Table 6: Morningstar Sustainable Score Distribution Score Descriptive Rank
Highest 10% 5 High
Next 22.5% 4 Above average
Next 35% 3 Average
Next 22.5% 2 Below average
Lowest 10% 1 Low
From the global database of Morningstar, open-ended funds with high rating were
taken. This leads to a total of 3,701 funds globally. Nevertheless, as the purpose of this
thesis is to find evidence that there is a possible link between the performance of SRI
funds with the level of CSR implement on a country basis, it has been necessary to filter
those datas. Indeed, filtering datas on the basis of their domicile led to a first data set of
44
1,391, then applying a filter based on the location of their head office led to a second
data set of 2,519 funds.
5.2. Observations
5.2.1. Observations from global datas The global database accounts for 3,701 funds. These funds are domiciled all around the
globe but almost 50% of it are domiciled in Luxembourg. Nevertheless, Luxembourg
funds, are mainly destined for European and Global cross-border distribution. Indeed
none of the funds domiciled in Luxembourg are purposed to be sold in Luxembourg.
These funds are designated at 80% for sales at a European and Global cross boarder
level. The second country that counts the largest number of fund is the United
Kingdom. Indeed, there are 506 UK funds that accounts for 14% of the Morningstar
Sustainable Funds. In terms of currencies, Euro and the Pound Sterling clearly
dominated the data set, accounting for more than 60% of the number of funds. With
regards to the asset allocation, equity funds is the main fund type, representing 84% of
the data set. Regarding to the sales region, 44% of the total number of funds are
designated to be sold within Europe. Indeed, cross-european distribution of UCITS fund
was facilitated by the UCITS III European regulation.
Appendix 8 provides detailed information about the global database.
5.2.3. Observation on a domicile basis Out of the 3,701 funds of the data set, the amount of funds domiciled in the 12 countries
of the scope of this work ciphers to 1,391 funds. The Morningstar funds with a high
Sustainable rating are mainly invested in equities (i.e. 80%).
The following graph shows the repartition of the different allocations for the 1391 funds
selected.
45
In addition to this, out of the 11 currencies represented in the data set, Euro and the
British pounds are the most present currencies. Indeed, both currencies account for 83%
of the funds with the highest Sustainable Morningstar rating. The repartition of the
different currencies for the sustainable funds is shown in the following graph.
The majority of the 1,391 funds are domiciled in the UK. After UK, France is the
second country and Spain the third one. Going further, as for the domicile, the major
part of the fund have the head office of their management companies located in the UK,
Allocation 16%
Alternative 0%
Convertibles 1%
Equity 79%
Fixed Income 3%
Miscellaneous 1%
Figure 16 : Asset allocation, datas based on the 12 EU domiciles
Euro 49%
Pound sterling 34%
Swedish Krona 5%
Swiss Franc 5%
Norwegian Krone 3%
US Dollar 3%
Danish Krone 1%
Others 0%
Figure 17 : Currencies, datas based on the12 EU domiciles
46
and the largest second part located in France. Appendix 9 provides detailed information
about the domicile database.
5.2.4. Observation based on a the head office of the management company of the fund Observations made for the 2,519 funds based on the location of the head office of the
management company are quite similar to those for funds based on a domicile basis.
Indeed, these 2,519 funds at invested in equities for 83%. Euro and the Pound sterling
are the currencies that clearly predominate the data set and the head office of the
management companies are mostly located in UK and France (i.e. 31% in the UK and
19% in France).
Even though, the major part of the funds having their management companies
established in the 12 Europeans countries analyzed in the scope of this work, are
domiciled in Luxembourg (i.e. 47%), UK and France respectively hold the second and
third place in terms of domicile, as for the fund domicile analysis. Appendix 10
provides detailed information about this database.
2% 4% 1%
19%
7%
5% 2% 4% 4%
6% 15%
31%
Figure 18: Repartition of the location of the management companies, datas based on the12
EU ManCo locations
Austria
Belgium
Finland
France
Germany
Italy
Netherlands
Norway
47
5.3. Preliminary analyses
5.3.1 Period analyzed In first instance, the period analyzed is a 5-years period. The 5-years period is not a
random choice. As the major part of the information stated in the first part of this work
was published between a time lapse of approximately 5 years, it has been judged
necessary to consider a period of 5 years for the analysis. Therefore, the total return
annualized for 5 years have been retrieved from Morningstar. As some sustainable have
been created after 2011, returns were not provided by Morningstar and the funds were
therefore removed from the data set. The data set based on the fund domicile was
reduced to 965 funds and the data set based on the head office of the management
company was reduced to 1,417 funds.
5.3.2 Return measure Fund performance is translated via the alpha generated by a fund. Alpha can be defined
as:
« the amount of value that the manager has added (if positive) or subtracted (if negative) to the investment process. Total actual returns = (Expected returns) + (Alpha) » (Reilly & Brown, 2012).
Therefore, expected return is represented by a market index and the market index
selected here is the S&P Europe 350 Daily RC 10% ER EUR. The value of the expected
return is the total return annualized for 5 years which was retrieved from Morningstar
and ciphers to -1.511.
In addition to this, in order to have a clearer idea of the real returns generated by each
fund, the management fees have also been removed.
5.3.3. Top 10 funds returns Out of the 1391 funds that have their domicile in one of the 12 countries of the scope of
this work, the 5 year annualized total returns were provided only for 965 funds. The 10
first funds that experience the higher alpha are retrieved in table 7.
And out of the 2,519 funds that have the location of their head office located in one of
the 12 European countries, table 8 shows the 10 funds that have the highest alphas.
1 At the 31st of may 2016
48
Table 7: Top 10 Alpha values for the data set based on the domicile of the fund Name Domicile Manco
Head Office
ALPHA EXCESS ALPHA
Portfolio Sustainability Score
Candriam Sust Pacific R EUR Belgium Belgium 185,694 180,144 53,99 Seligson & Co Global Top 25 Pharma B Finland Finland 15,657 10,107 54,11 Seligson & Co Global Top 25 Pharma A Finland Finland 15,651 10,101 54,11 Degroof Equities US Flexible I€ Belgium Belgium 15,356 9,806 49,95 Degroof Equities US Flexible A€ Belgium Belgium 15,262 9,712 49,95 Fidelity American Special Sits W Acc UK UK 14,376 8,826 49,18 Federal Indiciel US I A/I France France 13,769 8,219 57,81 Evli Swedish Small Cap A Finland Finland 13,425 7,875 60,02 Evli Swedish Small Cap B Finland Finland 13,425 7,875 60,02 Öhman Småbolagsfond A Sweden Sweden 13,238 7,688 60,28
49
Table 8: Top 10 Alpha values for the data set based on the location of the management company Name Domicile Manco
Head Office
ALPHA EXCESS ALPHA
Portfolio Sustainability Score
Candriam Sust Pacific R EUR Belgium Belgium 185,694 180,144 53,99 Candriam Eqs L Biotechnology I USD Acc Luxembourg Belgium 19,478 13,928 49,85 Candriam Eqs L Biotechnology R USD Acc Luxembourg Belgium 18,828 13,278 49,85 Candriam Eqs L Biotechnology R GBP Acc Luxembourg Belgium 18,384 12,834 49,85 Candriam Eqs L Biotechnology C USD Acc Luxembourg Belgium 17,588 12,038 49,85 Candriam Eqs L Biotechnology C USD Inc Luxembourg Belgium 17,545 11,995 49,85 Candriam Eqs L Biotechnology L Luxembourg Belgium 17,395 11,845 49,85 Candriam Eqs L Biotechnology N Luxembourg Belgium 16,547 10,997 49,85 Seligson & Co Global Top 25 Pharma B Finland Finland 15,657 10,107 54,11 Seligson & Co Global Top 25 Pharma A Finland Finland 15,651 10,101 54,11
50
5.3.3. Analysis based on the Alpha In order to have a first look on the possible existence of the link between the fund
performance and its provenance country, the average alphas and standard deviation
have been calculated on basis of the fund’s domicile and on basis of the location of the
head offices of their management companies.
Average alpha’s values are positive. This is highly influenced by the fact that the
benchmark performance is negative.
The results obtained are the following:
Table 9: Country ranking based on alphas’ values
Ranking Average Alpha Ranking Domicile
Country ranking Average Alpha Ranking Manco
Head Office
1 Belgium Switzerland Belgium
2 Netherlands France Finland
3 Sweden United Kingdom Italy
4 Italy Sweden Netherlands
5 United Kingdom Netherlands Sweden
6 Finland Norway Germany
7 Switzerland Finland Switzerland
8 France Spain France
9 Austria Belgium Austria
10 Germany Germany United Kingdom
11 Norway Austria Spain
12 Spain Italy Norway
As absolute values cannot be compared, the different changes in the ranking will be
analyzed for each country.
The top 5 average alpha ranking based on the domicile of funds and the top 5 of the data
set of the ranking based on the location of the head office of the management company
have in common 4 countries : Belgium, Netherlands, Sweden and Italy. According to
this analysis, Belgium stands at the first place, with the highest return that investors can
51
obtain from funds. Belgium and Italy experience the largest ascent in the ranking.
Belgium datas are also the most dispersed, compared to the others. This is due to the
Candriam Sust Pacific R EUR fund that benefits from a very high returns, and therefore
a very high alpha. The other countries of the top 5 have a standard deviation around 3
and 7.
Netherlands, which was already in the top 5 of the country ranking, is still in the top 5,
achieving an average alpha for twice higher when the data set is based on the domicile
rather than when it is based on the location of the head office of the management
company.
Concerning Sweden, it maintains a stable position in the ranking, even though the
average alpha of funds having their management companies domiciled in Sweden
experience an average alpha wich is also twice higher than those of the management
company, similar to the Netherlands.
The most surprising result obtained with this analysis goes to Italy. Indeed, Italy is,
according to the ranking of CSR implementation of CSR values, the worst country to
implement CSR on a national basis. Nevertheless, even if Italy records small number of
funds, especially for funds domiciled in Italy, the average alpha raises above 4.4%.
With regards to Switzerland, France and to the United Kingdom, which stand at the top
of the country index, they experience different results when a deeper look is given to
their datas.
Switzerland is, according to the index created in the chapter 4, the country that
implements the best CSR on a national basis. Nevertheless, Switzerland holds the 7th
place when we give a deeper look on the Swiss funds’ performance. Therefore, even
tough Switzerland benefits from a large number of funds when the sample is based on
the location of the head office of the management company, these funds achieve returns
with an average of 2%.
The second country that is theoretically supposed to be the best at implementing social
responsibility on a national basis is France. However, we notice that France is only the
8th country when we look at both the performance on the basis of the domicile of the
management company and on the basis of the domicile.
United Kingdom is the country with the largest amount of datas. Data set based on the
management is highly dispersed. UK which holds the 5th place in the ranking based on
52
the domicile, achieves a positive average alpha of 4.27 while it achieves a lower alpha
of 1.16 when data are based on the location of the management company.
Norway and Spain are located in the middle of the country ranking, but when a deeper
look is given to the values of their average alphas, they achieve the worst average
performance. Indeed, they occupy the last places of the ranking.
Finland was also located by the middle of the country ranking, but counter to Norway
and Spain, stands at the second place of the ranking when the analysis is based on the
head office of the management company and keeps a stable position for the domicile
data set.
Germany, that was at the 10th place in the country ranking, is ranked higher in the
average alpha ranking for funds which have the location of their management
companies located in Germany. Funds with a German way of management achieve
therefore better returns than funds domiciled in Germany.
Austria achieves low scores in the 3 rankings, showing a low level of CSR
implementation and low returns on their Sustainable funds.
5.3.4. Analysis based on the Morningstar Sustainable Portfolio Score Thanks to the Portfolio Sustainable score attributed by Morningstar to help investors in
the guidance of their investments goals, it is possible to get a first insight of the
concordance between the index created to understand which countries implement CSR
the best and the average of the Portfolio Sustainable Score on a country basis.
It can be seen that there are several changes in the index ranking compared to the index
based on the Morningstar Sustainability Score.
If we go further regarding the average Portfolio Sustainable score based on the
domicile, we notice that Switzerland and the UK which were at the top of the country
index, are now at the 8th and 12d place of the ranking, meaning that they experience a
lower average of portfolio Sustainable score even tough they have a large amount of
funds involved in SRI. The result is even more surprising for the United Kingdom
which is, according to the results, the country that performs the worst in terms of
sustainability.
Another surprising result is the fact that Spain, which was ranked at the 8th in the
country index, now stands at the first place. Based on that result, Spain is doing well,
53
because, even if Spain does not have the largest part of AuM involved or the largest part
of funds, they really try to implement CSR. This element goes in line with the study of
Gjolberg (2009) in which Spain achieve high score on the process oriented initiatives.
Also, Germany won 5 places in the ranking. These results show that, even if a small part
of their assets is involved in SRI, these assets may prove to be of high quality.
In the opposite, France keeps its high place in the ranking, showing a large offer of high
quality sustainable funds in the french market.
Results are not so different when the analysis is based on the head office of the
management company. Indeed, Switzerland and the United Kingdom are at the end of
the ranking while Spain and France and the Netherlands are at the top of it. Belgium and
Austrian also gain a few places, at the expense of Norway and Sweden.
Table 10: country ranking based on the Morningstar Sustainable Portfolio Score
Domicile Country ranking ManCo
1 Spain Switzerland Spain
2 France France Netherlands
3 Netherlands United Kingdom France
4 Sweden Sweden Germany
5 Germany Netherlands Finland
6 Italy Norway Belgium
7 Austria Finland Austria
8 Switzerland Spain Norway
9 Norway Belgium Sweden
10 Belgium Germany Italy
11 Finland Austria Switzerland
12 United Kingdom Italy United Kingdom
To go further, it is also possible to analyze the linear trend that exists between the alpha
of each fund and the Portfolio Sustainable Score attributed by Morningstar for each
fund, taking into consideration both the domicile basis and the head office of the
management company basis.
54
Indeed, by taking the Morningstar Sustainability score as the x variable and the alpha as
the y variable, it is possible to build scatter plots showing the positive or negative linear
relation between both variables. These scatter plots are available in appendices 11 to 34.
On a domicile basis, we can determine that there is an increasing relationship between
the Portfolio Sustainable Score and the alpha generated by the fund for 5 countries:
Austria, Finland, Norway, Sweden and Switzerland while there is a negative
relationship for Belgium, France, Germany, Italy, Netherlands and Spain. Nevertheless,
the relationship that links the alpha of the UK funds with the sustainable score seems to
be neutral.
Nevertheless, negative trends can be seen when we look at location of the management
company. Indeed, Finland, Belgium, France, Germany, Italy, Spain and Switzerland
have a negative trend and only Austria, Norway, Netherlands, Sweden and the United
Kingdom have a positive trend.
When looking more in details into the datas, it is possible to understand the differences
between both data sets. Austria, Norway and Sweden are the only countries to benefit
from positive linear relationship between alpha’s and the Morningstar Portfolio
Sustainable Score when the analysis is based on the domicile of the fund or on the
location of the management company, and that even if they have different data sets for
both analysis. Besides that, Austria, Norway and Sweden have the same highest and
lowest values for their respective sets of datas.
Finland has a positive trend for its domicile but a negative trend for the location of the
head office of the management company. Finland’s data set is bigger for its domicile
and these datas are also more dispersed which may explain the fact that the link between
the alpha and the Portfolio Sustainability Score is positive on a domicile basis.
In the opposite of Finland, the Netherlands has a negative trend for its domicile while it
has a positive trend for the location of the head office of the management company.
This is influenced by the large dispersion of the data set of the location of the
management company.
The United Kingdom and Switzerland also have different rankings when the analysis is
based on their domicile or on the location of their management companies. This is due
to the change in their data sets. Indeed, the data sets retrieved from the location of their
55
management companies are much bigger than those of the domicile, changing therefore
completely their rankings.
Both data sets are exactly the same for Spain meaning that both results are the same.
France, Germany and Italy also experience similar results. These 4 countries have
different samples but their positions do not change.
Belgium also experiences a negative relationship between the alpha’s of the Belgian
funds and their Portfolio Sustainable scores, even though the fact that the data set based
on the domicile of the head office is much bigger and less dispersed than the data set
based on the domicile.
Table 11: Detailed datas for the Morningstar Portfolio Sustainable Score, on a domicile basis
DOMICILE Biggest value
Lowest value Moyenne
Standard deviation
Data set size
Austria 62,38 48,69 55,77 4,08 53
Belgium 64,42 49,95 54,77 10,68 33
Finland 62,92 41,91 54,42 6,15 42
France 63,95 48,70 59,31 3,32 179
Germany 66,03 49,76 57,63 8,21 56
Italy 60,27 48,25 56,27 5,57 4
Netherland 63,17 51,51 58,36 3,79 10
Norway 63,95 43,58 55,17 3,85 54
Spain 65,97 49,94 59,76 2,95 111
Sweden 64,08 46,97 57,79 5,23 41
Switzerland 60,56 49,79 55,24 2,54 36
UK 64,50 46,43 54,38 3,51 346
56
Table 12: Detailed datas for the Morningstar Portfolio Sustainable Score, on the basis of the location of the ManCo
ManCO Biggest value
Lowest value Moyenne
Standard deviation
Data set size
Austria 62,38 48,69 56,41 4,20 42
Belgium 64,42 49,85 56,69 4,94 65
Finland 62,92 49,13 56,96 4,29 23
France 73,06 43,66 57,67 4,86 261
Germany 66,03 49,66 57,29 3,96 71
Italy 63,21 49,44 55,42 9,37 45
Netherland 63,17 49,51 58,00 12,35 24
Norway 63,95 43,58 55,54 4,22 56
Spain 65,97 49,94 59,62 2,98 84
Sweden 64,08 46,97 55,51 8,10 82
Switzerland 63,22 49,49 55,31 3,65 197
UK 64,50 42,44 52,97 4,10 467
5.4 Excess alpha analysis In order to understand if the funds obtaining a high Morningstar Sustainability Rating
achieve better performance than their non- or less sustainable peers, the excess alpha
has been calculated and analyzed.
Indeed, it may be interesting to analyze if sustainable funds are able to perform better
than non-sustainable ones.
Detailed average alpha and excess alpha values are retrieved in appendices 35 and 35.
5.4.1. Benchmark measure As there does not exist any benchmark having only investment funds as assets, we used
the Morningstar Peer Groups. Due to the nature of the data set, the Morningstar Peer
Group Allocation EUR Moderate International has been selected. Its total return
annualized for 5 years ciphers to 5.55%2.
5.4.2. Average analysis On a domicile basis, the average alpha measure is positive and ciphers to 3.08% while
the excess alpha measure is -3.47%. In contrarian, the average alpha value for the data
base based on the location of the head office of the management company ciphers to
2.08% and the excess alpha measure is -2.47%.
2 at 9th of August 2016
57
The negative average excess alpha measure shows the inability of sustainable funds to
provide to its investor a superior return.
Based on these values, it is therefore possible to assert that, on average, sustainable
funds are generating more alphas when their provenance is defined via their domicile.
Nevertheless, the average amount that a manager may have subtracted to the fund is
better when the fund selection is made on the basis of the head office of the
management company.
The order of the ranking of the countries does not change from the one retrieved in
section 5.3.3. Indeed, the performance of the peer group has simply been removed,
which did not change the ranking of average excess alpha’s values. Nevertheless, in the
opposite to average alpha’s value, that were all positives, the average value of the
excess are mostly positives, except for Belgium and the Netherlands.
Indeed, thanks to the high performance of the Candriam Sust Pacific R EUR, Belgian
excess alpha’s average turns out to be positive.
With regards to the Netherlands, they show a small average positive excess alpha for the
data set based on the domicile of the management company. Belgian and Dutch funds
are therefore, in average, the only ones generating an average positive excess alpha.
5.4. Analysis between the performance and the country rating The purpose of this thesis is to find a possible relationship between the performance of
the funds with a high sustainable Morningstar rating and the CSR framework put in
place for 12 European countries. As the provenance of a fund is defined according to its
domicile and the location of the management company, there are 2 different data sets
that require to be analyzed. It is therefore possible to make hypothesis for each data set.
5.4.1 Method used The method that will be used in order to see how the origin of the fund is a function of
its performance is the linear regression. Indeed, a linear regression allows to link a
dependent and an independent variable based on the hypothesis that the function that
links the explicative variable is linear. In order to realize the regressions, the excel tool
Toolpak will be used.
The dependent variable, also called, x, is the country rating. Indeed, we are trying to see
if the country in which the fund is domiciled or where the fund has the location of its
58
management company may influence the independent variable, y, which is the alpha
generated by the manager of the fund.
Because the index created in chapter 4 captured all available information concerning the
12 European countries analyzed, a simple regression is used here.
5.4.2. Results obtained The regression line obtained for the data base based on the the funds domicile is an
increasing function: y = 1.3919 + 0.0302x.
Nevertheless, as there is only one explanatory variable, the coefficient of determination,
R2, is very low and worth only 1%.
In the opposite, the regression line obtained when the data set is based on the location of
the head office of the management company is decreasing : y = 6.0487- 0.0694x.
Similarly to the data base based on the domicile, the coefficient of determination R2
ciphers only to 1%.
-50,00
0,00
50,00
100,00
150,00
200,00
0 10 20 30 40 50 60 70
Figure 19:Linear regression (Domicile database)
ALPHA
Linéaire (ALPHA)
59
In view of these results, there is a positive relationship between the domicile of the fund
and its generated alpha. Indeed, this means that a fund domiciled in a country which
implements social responsible investment deeper should experience a higher alpha.
Precisely, it means that an increase of one point in the index created in chapter 4, will
lead in an increase of the alpha for a value of 0.0303. In the opposite, the regression line
that links the alpha and the SRI country in which the head office of the fund is located,
is decreasing. So for an increase of the country index by one, the alpha will decrease by
0.0694.
When the regressions are realized using the excess alpha, instead of the alpha, the slope
of the regression line is the same but the intercept is lower. This is due to the fact that
sustainable funds are underperforming in terms of excess alpha.
These results regarding the excess alpha, are represented in the following functions:
Regression line on a domicile basis: y = -4.1581+0.0302x.
Regression line on the basis of the location of the management company: y = 0.4988 -
0.0694x.
Detailed results are available in appendices 37 to 40.
-50,00
0,00
50,00
100,00
150,00
200,00
0 10 20 30 40 50 60 70
Y
Variable X 1
Figure 20 : Linear regression (ManCo database)
Y
60
5.5. Final results At the first glance, and simply based on the primary analyses, the relationship between
the country and the alpha of a sustainable fund seems to be uncorrelated. Furthermore,
when the analysis is done on the basis of the fund’s domicile, alphas’ values tend to be
higher.
Some countries differentiate themselves in the rankings retrieved in the primary
analysis. First, Belgium is the country with the highest levels of alpha and excess alpha.
Second, Netherlands are achieving particularly good alphas and is the only country,
after Belgium, that benefits from an average positive excess alpha for its domicile based
data set. Netherlands are not only good performing in terms of alpha, but are also
performing well in terms of sustainability investing. Indeed, Netherlands achieve a high
average Morningstar Portfolio Score.
Third, thanks to its high Morningstar Sustainability average score, we can affirm that
Spain is the country that implement the most sustainability issues in its funds’ investing
policies confirming the fact that Spain is more « process-oriented » towards SRI
initiatives.
In the opposite, Italy funds may appear to be more « result-oriented ». Indeed, this is
shown by the fact that Italy achieves low portfolio sustainable score but ranks pretty
well in the alpha average ranking.
United Kingdom and Switzerland achieve the worst average alpha and Morningstar
Portfolio Sustainable Score, which is the opposite of the result we could expect
regarding the country rating index.
France achieves a good average of Morningstar Sustainable score, which corresponds to
the finding of the county index. Nevertheless, the relation between the score and the
alpha generated by the fund is negative, showing that an increase in the portfolio
sustainable score leads to a decrease of the alpha.
The number of increasing relationships between the alpha and the Morningstar
Sustainable score is higher when the analysis is based on the domicile. These results go
along with the results obtained with the simple regressions realized between the
theoretical country index and alphas values.
61
Indeed, the simple regressions realized allow to precise the relationship between the
origin of a fund and its alpha. Results show an increasing relationship between a fund’s
domicile and the alpha while showing a decreasing relationship between the location of
the head office of the management and the fund’s alpha.
62
63
Chapter VI: Conclusion The purpose of this thesis was to show if the CSR environment of the origin of a
corporate social investment fund has a positive impact on its performance. In order to
draw a final conclusion, we went through two major steps. First, an index has been
constructed to capture the level of CSR and SRI implementation on a national basis for
12 European countries. Secondly, a definition of SRI funds has been settled taking into
account the domicile of the fund and the location of the management company.
By taking into consideration whether the domicile or the location of the management
company, the empirical results obtained differ. Indeed, on one hand, the link between
the country rating obtained regarding the domicile of the fund and its generated alpha is
positive. While, on the other hand, the relation based on the location of the management
company is negative.
It is therefore possibe to assert that the origin of the fund must be decomposed in order
to understand the impact on the fund performance.
6.1. Limitations and recommandations First, the origin of the fund was defined via the domicile of the fund and the corporate
culture of the fund through the location of the management company. Nevertheless,
initially, a third element was supposed to be added to the origin the fund: the origin of
institutional investors. This analysis was impossible to realize due to a restrinct ascess
to information.
Secondly, due to the fact that the origin of the fund must be decomposed in order to
understand the impact on the fund performance, we know that: on one hand, the link
between the country rating obtained regarding the domicile of the fund and its generated
alpha is positive. While, on the other hand, the relation based on the location of the
management company is negative. It would be interesting to study the global impact on
the fund performance, so that we could know which of those impacts is dominant and if
it is a general rule or if it varries for each case.
64
65
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European directives Directive (EC) n° 2014/91 of 23 July 2014 amending Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) as regards depositary functions, remuneration policies and sanctions, Official Journal of European Union, L257/186, 28 August 2014. Directive (EC) 2009/65/EC of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) as regards depositary functions, remuneration policies and sanctions, Official Journal of European Union, L302/32, 17 November 2009.
APPENDICES
Table of content Appendix 1: SRI Asset under management, per country and per strategies (2013). ............... III
Appendix 2 : Asset under management repartition, circular diagram (2013) ........................... II
Appendix 3: Number of SRI funds, on a basis of 100 ............................................................. III
Appendix 4: Index of CSR practices, total score per nation (basis of 100) ............................. IV
Appendix 5: Index, the most demanding CSR initiatives, total scores per nation (basis of 100) ................................................................................................................................................. VII
Appendix 6: Index, the least demanding CSR initiatives, total scores per nation (basis of 100) ............................................................................................................................................ VVIII
Appendix 7: Country index summary and results ................................................................... VII
Appendix 8: Observations from global data base ................................................................. VIII
Appendix 9: Observations from the domicile data base .......................................................... IX
Appendix 10: Observations from the location of the management company data base ......... X
Appendix 11: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the domicile of the Austrian funds ............................................................ XIII
Appendix 12: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the domicile of the Belgian funds ............................................................. XIV
Appendix 13: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the domicile of the Finnish funds .............................................................. XV
Appendix 14: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the domicile of the French funds .............................................................. XVI
Appendix 15: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the domicile of the German funds ............................................................ XVII
Appendix 16: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the domicile of the Italian funds ............................................................ XVIII
Appendix 17: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the domicile of the Dutch funds ................................................................ XIX
Appendix 18: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the domicile of the Norwegian funds ......................................................... XX
Appendix 19: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the domicile of the Spanish funds ............................................................. XXI
Appendix 20: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the domicile of the Swedish funds ........................................................... XXII
Appendix 21: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the domicile of the Swiss funds ............................................................. XXIII
Appendix 22: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the domicile of the UK funds ................................................................. XXIV
Appendix 23: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the location of the management companies of the Austrian funds ........ XXIII
Appendix 24: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the location of the management companies of the Belgian funds ......... XXIV
Appendix 25: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the location of the management companies of the Finnish funds ........... XXV
Appendix 26: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the location of the management companies of the French funds ........... XXVI
Appendix 27: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the location of the management companies of the German funds ........ XXVII
Appendix 28: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the location of the management companies of the Italian funds ......... XXVIII
Appendix 29: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the location of the management companies of the Dutch funds ............ XXIX
Appendix 30: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the location of the management companies of the Norwegian funds ..... XXX
Appendix 31: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the location of the management companies of the Spanish funds ......... XXXI
Appendix 32: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the location of the management companies of the Swedish funds ....... XXXII
Appendix 33: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the location of the management companies of the Swiss funds.......... XXXIII
Appendix 34: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the location of the management companies of the UK funds ............. XXXIV
Appendix 35: Alphas’ values and standard deviations, per country ................................. XXXV
Appendix 36: Excess alphas’ values and standard deviations, per country ...................... XXXV
Appendix 37: Regression results, Alpha and country index (Domicile basis) ................ XXXVI
Appendix 38: Regression results, Excess Alpha and country index (Domicile basis) .. XXXVII
Appendix 39: Regression results, Alpha and country index (ManCo basis) ................ XXXVIII
Appendix 40: Regression results, Excess Alpha and country index (ManCo basis) ...... XXXIX
Appendix 1: SRI Asset under management, per country and per strategies (2013).
Strategy Austria Belgium Finland (EUR) France Germany Italy Netherlands Norway (NOK) Norway (EUR)
best-in-class 4.575 17.132 310 173.213 15.813 3.917 15.232 374.712 40.019,24 Sustainability themed 82 816 220 4.392 4.127 1.094 20.163 17.505 1.869,53 Norm-based screening 5.467 20.235 64.667 1.119.040 10.377 351.754 746.125 6.727.743 718.522,95 ESG integration 986 22.006 46.075 440.000 10.990 33.879 199.512 793.573 84.753,60 Engagement and voting 2.060 38.006 50.565 55.304 11.736 54.372 649.198 2.706.029 289.003,90 Exclusion 6.580 222.026 95.248 472.660 25.269 496.561 1.068.769 6.715.740 717.241,03 Total AuM 2013 19.750 320.221 257.085 2.264.609 78.312 941.577 2.698.999 17.335.302,00 1.851.410,25 Basis of 100 0,49 8,01 6,43 56,62 1,96 23,54 67,47 433,38 46,29
Strategy Spain Sweden (SEK)
Sweden (EUR)
Switzerland (CHF)
Switzerland (EUR) UK(GBP)
United Kingdom (EUR)
best-in-class 1.961 429.630 46.271,15 31.216 28.144,35 2.784 3.522,60 Sustainability themed 82 17.710 1.907,37 13.579 12.242,83 10.737 13.585,53 Norm-based screening 14.247 3.753.857 404.290,40 12.833 11.570,23 59.665 75.494,12 ESG integration 7.338 2.915.551 314.004,84 24.441 22.036,01 990.536 1.253.325,20 Engagement and voting 9.103 3.120.521 336.080,11 28.501 25.696,50 1.434.050 1.814.503,47 Exclusion 92.421 5.784.887 623.032,33 35.068 31.617,31 394.915 499.685,95 Total AuM 2013 125.152 16.022.156 1.725.586,20 145.638 131.307,22 2.892.687 3.660.116,86 Basis of 100 3,13 400,55 43,14 3,64 3,28 72,32 91,50
I
Appendix 2 : Asset under management repartition, circular diagram (2013)
Austria; 19.750
Belgium; 320.221 Finland (EUR);
257.085
France; 2.264.609
Germany; 78.312
Italy; 941.577
Netherlands; 2.698.999
Norway (EUR); 1.851.410,25 Spain; 125.152
Sweden (EUR); 1.725.586,20
Switzerland (EUR);
131.307,22
United Kingdom (EUR);
3.660.116,86
II
Appendix 3: Number of SRI funds, on a basis of 100
III
Appendix 4: Index of CSR practices, total score per nation (basis of 100)
IV
Appendix 5: Index, the most demanding CSR initiatives, total scores per nation (basis of 100)
V
Appendix 6: Index, the least demanding CSR initiatives, total scores per nation (basis of 100)
VI
Appendix 7: Country index summary and results
COUNTRY INDEX OF CSR PRACTICES
MOST DEMANDING CSR INITIATIVE
LEAST DEMANDING CSR INITIATIVE
NUMBER OF FUNDS
EUROSIF ANALYSIS TOTAL AVERAGE
Austria 12 30 38 13,0 66,8 159,8 32,0 Belgium 32 37,5 28 71,3 36,0 204,8 41,0 Finland (EUR) 82 67,5 76 0,0 35,5 261,0 52,2 France 48 45 60 87,7 85,5 326,2 65,2 Germany 30 42,5 10 30,0 67,3 179,8 36,0 Italy 12 6,25 30 4,0 74,5 126,8 25,4 Netherlands 66 68,125 45 17,0 89,2 285,3 57,1 Norway (EUR) 78 77,5 50 9,7 48,8 263,9 52,8 Spain 44 33,75 90 5,3 67,7 240,8 48,2 Sweden (EUR) 80 76,25 70 13,3 47,7 287,3 57,5 Switzerland (EUR) 84 85,625 62 29,0 67,8 328,4 65,7 United Kingdom (EUR) 64 80,625 38 31,7 97,2 311,5 62,3
VII
Appendix 8: Observations from global data base
Asset allocationnb Currency nb Domicile nb Sales region nb Fund Legal Structure nbAllocation 317 Australian dollar 20 Austria 73 Austria 27 Open Ended Investment Company1260Alternative 38 Canadian dollar 6 Belgium 45 Belgium 18 SICAV 1678Convertibles 64 chinese yuan renminbi 2 Denmark 36 Denmark 28 Unit Trust 167Equity 3112 Czech Koruna 9 Finland 52 Finland 31 FCP 528Fixed Income 158 Euro 1624 France 242 France 205 SIMCAV 68Miscellaneous 12 Forint 5 Germany 86 Germany 83
Japanese yen 32 Ireland 381 Latvia 1 TOTAL 3701TOTAL 3701 new zealand dollar 3 Isle of Man 2 Netherlands 22
norwegian krone 65 Jersey 8 Norway 16offshore chinese yuan 5 Latvia 1 Portugal 11Pound sterling 723 Liechtenstein 32 Slovenia 3Romanian Leu 1 Luxembourg 1835 Spain 144Singapore dollar 37 Mauritius 1 Sweden 60South african rand 2 Netherlands 15 Switzerland 146Swedish krona 119 Norway 84 United Kingdom 374Swiss franc 203 Portugal 9 Italy 49US Dollar 769 Slovenia 3 Czech Republic 4Zloty 25 Spain 140 European Cross-Border 1649Danish krone 41 Sweden 65 Global Cross-Border 569hong kong dollar 10 Switzerland 72 Nordic cross-border 85
United Kingdom506 Greece 1TOTAL 3701 United States 2 Hungary 2
Italy 11 Singapore 5South Africa 6
TOTAL 3701 Taiwan 9Slovakia 1Pure offshore 152
TOTAL 3701
VIII
Appendix 9: Observations from the domicile data base
Asset allocationnb Currency nb Domicile nb Sales region nb Fund Legal Structure Manco Head Office nbAllocation 223 Australian dollar 2 Austria 73 Austria 26 Open Ended Investment Company864 Austria 56Alternative 3 Canadian dollar 0 Belgium 45 Belgium 11 SICAV 81 Belgium 45Convertibles 11 chinese yuan renminbi 0 Denmark 0 Denmark 0 Unit Trust 89 denmark 14Equity 1105 Czech Koruna 2 Finland 52 Finland 30 FCP 289 Finland 26Fixed Income 42 Euro 678 France 242 France 193 SIMCAV 68 France 219Miscellaneous 7 Forint 1 Germany 86 Germany 39 germany 76
Japanese yen 4 Ireland 0 Latvia 0 TOTAL 1391 Italy 12TOTAL 1391 new zealand dollar 0 Isle of Man 0 Netherlands 15 Luxembourg 17
norwegian krone 40 Jersey 0 Norway 6 US 207offshore chinese yuan 0 Latvia 0 Portugal 0 Netherlands 18Pound sterling 471 Liechtenstein 0 Slovenia 0 Norway 84Romanian Leu 0 Luxembourg 0 Spain 140 Portugal 1Singapore dollar 0 Mauritius 0 Sweden 41 Spain 111South african rand 0 Netherlands 15 Switzerland 65 Sweden 67Swedish krona 74 Norway 84 United Kingdom 325 Switzerland 93Swiss franc 72 Portugal 0 Italy 11 UK 345US Dollar 40 Slovenia 0 Czech Republic 2 Liechtenstein 0Zloty 0 Spain 140 European Cross-Border400 Singapore 0Danish krone 7 Sweden 65 Global Cross-Border 13 Japan 0hong kong dollar 0 Switzerland 72 Nordic cross-border 72 Slovenia 0
United Kingdom506 Greece 0 hong kong 0TOTAL 1391 United States 0 Hungary 1 Andorre 0
Italy 11 Singapore 0 Ireland 0South Africa 0 Latvia 0
TOTAL 1391 Taiwan 0 Canada 0Slovakia 1 South africa 0Pure offshore 0
TOTAL 1391TOTAL 1391
IX
Appendix 10: Observations from the location of the management company data base Asset allocation nb Currency nb Domicile nb Sales region nb Fund Legal Structure nb Manco Head Office nbAllocation 228 Australian dollar 10 Austria 73 Austria 27 Open Ended Investment Company 842 Austria 56Alternative 19 Canadian dollar 0 Belgium 45 Belgium 18 SICAV 1110 Belgium 100Convertibles 40 chinese yuan renminbi 0 Denmark 7 Denmark 7 Unit Trust 86 denmark 0Equity 2097 Czech Koruna 7 Finland 41 Finland 21 FCP 422 Finland 27Fixed Income 123 Euro 1226 France 228 France 199 SIMCAV 59 France 485Miscellaneous 12 Forint 3 Germany 74 Germany 62 germany 167
Japanese yen 17 Ireland 167 Latvia 0 TOTAL 2519 Italy 117TOTAL 2519 new zealand dollar 0 Isle of Man 2 Netherlands 20 Luxembourg 0
norwegian krone 54 Jersey 4 Norway 12 US 0offshore chinese yuan 2 Latvia 0 Portugal 2 Netherlands 48Pound sterling 456 Liechtenstein 0 Slovenia 0 Norway 94Romanian Leu 1 Luxembourg 1186 Spain 131 Portugal 0Singapore dollar 26 Mauritius 1 Sweden 38 Spain 111South african rand 0 Netherlands 15 Switzerland 105 Sweden 151Swedish krona 88 Norway 83 United Kingdom 273 Switzerland 381Swiss franc 134 Portugal 0 Italy 21 UK 782US Dollar 459 Slovenia 0 Czech Republic 4 Liechtenstein 0Zloty 20 Spain 130 European Cross-Border 1115 Singapore 0Danish krone 14 Sweden 54 Global Cross-Border 285 Japan 0hong kong dollar 2 Switzerland 65 Nordic cross-border 78 Slovenia 0
United Kingdom 336 Greece 0 hong kong 0TOTAL 2519 United States 0 Hungary 1 Andorre 0
Italy 8 Singapore 5 Ireland 0South Africa 0 Latvia 0
TOTAL 2519 Taiwan 4 Canada 0Slovakia 1 South africa 0Pure offshore 90
TOTAL 2519TOTAL 2519
X
Appendix 11: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the domicile of the Austrian funds
-14,00-12,00-10,00
-8,00-6,00-4,00-2,000,002,004,006,008,00
0,00 20,00 40,00 60,00 80,00
Alpha, Austria (domicile basis)
PortfolioSustainability Score
Linéaire (PortfolioSustainability Score)
-18,00-16,00-14,00-12,00-10,00
-8,00-6,00-4,00-2,000,002,004,00
0,00 20,00 40,00 60,00 80,00
Excess Alpha, Austria (domicile basis)
PortfolioSustainability Score
Linéaire (PortfolioSustainability Score)
XI
Appendix 12: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the domicile of the Belgian funds
-50,00
0,00
50,00
100,00
150,00
200,00
0,00 20,00 40,00 60,00 80,00
Alpha, Belgium (Domicile basis)
Domicile Belgium
Linéaire (DomicileBelgium)
-50,00
0,00
50,00
100,00
150,00
200,00
0,00 20,00 40,00 60,00 80,00
Excess Alpha, Belgium (Domicile basis)
Domicile Belgium
Linéaire (DomicileBelgium)
XII
Appendix 13: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the domicile of the Finnish funds
-20,00
-15,00
-10,00
-5,00
0,00
5,00
10,00
15,00
20,00
0,00 20,00 40,00 60,00 80,00
Alpha, Finland (Domicile basis)
Domicile Finland
Linéaire (DomicileFinland)
-25,00
-20,00
-15,00
-10,00
-5,00
0,00
5,00
10,00
15,00
0,00 20,00 40,00 60,00 80,00
Excess Alpha, Finland (Domicile basis)
Domicile Finland
Linéaire (DomicileFinland)
XIII
Appendix 14: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the domicile of the French funds
-20,00
-15,00
-10,00
-5,00
0,00
5,00
10,00
15,00
20,00
0,00 20,00 40,00 60,00 80,00
Alpha, France (Domicile basis)
MorningstarSustainability Rating
Linéaire (MorningstarSustainability Rating)
-25,00
-20,00
-15,00
-10,00
-5,00
0,00
5,00
10,00
0,00 20,00 40,00 60,00 80,00
Excess Alpha, France (Domicile basis)
MorningstarSustainability Rating
Linéaire (MorningstarSustainability Rating)
XIV
Appendix 15: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the domicile of the German funds
-10,00
-5,00
0,00
5,00
10,00
15,00
0,00 20,00 40,00 60,00 80,00
Alpha, Germany (Domicile basis)
Domicile Germany
Linéaire (DomicileGermany)
-20,00
-15,00
-10,00
-5,00
0,00
5,00
10,00
0,00 20,00 40,00 60,00 80,00
Excess Alpha, Germany (Domicile basis)
Domicile Germany
Linéaire (DomicileGermany)
XV
Appendix 16: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the domicile of the Italian funds
0,00
1,00
2,00
3,00
4,00
5,00
6,00
7,00
8,00
9,00
0,00 20,00 40,00 60,00 80,00
Alpha, Italy (Domicile basis)
PortfolioSustainability Score
Linéaire (PortfolioSustainability Score)
-6,00
-5,00
-4,00
-3,00
-2,00
-1,00
0,00
1,00
2,00
3,00
0,00 20,00 40,00 60,00 80,00
Excess Alpha, Italy (Domicile basis)
PortfolioSustainability Score
Linéaire (PortfolioSustainability Score)
XVI
Appendix 17: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the domicile of the Dutch funds
0,00
2,00
4,00
6,00
8,00
10,00
12,00
0,00 20,00 40,00 60,00 80,00
Alpha, Netherlands ( Domicile basis)
MorningstarSustainability Rating
Linéaire (MorningstarSustainability Rating)
-3,00
-2,00
-1,00
0,00
1,00
2,00
3,00
4,00
5,00
6,00
0,00 20,00 40,00 60,00 80,00
Excess Alpha, Netherlands ( Domicile basis)
MorningstarSustainability Rating
Linéaire (MorningstarSustainability Rating)
XVII
Appendix 18: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the domicile of the Norwegian funds
-20,00
-15,00
-10,00
-5,00
0,00
5,00
10,00
15,00
0,00 20,00 40,00 60,00 80,00
Alpha, Norway (Domicile Basis)
PortfolioSustainability Score
Linéaire (PortfolioSustainability Score)
-25,00
-20,00
-15,00
-10,00
-5,00
0,00
5,00
10,00
0,00 20,00 40,00 60,00 80,00
Excess Alpha, Norway (Domicile Basis)
PortfolioSustainability Score
Linéaire (PortfolioSustainability Score)
XVIII
Appendix 19: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the domicile of the Spanish funds
-10,00
-5,00
0,00
5,00
10,00
15,00
0,00 20,00 40,00 60,00 80,00
Alpha, Spain (Domicile basis)
MorningstarSustainability Rating
Linéaire (MorningstarSustainability Rating)
-15,00
-10,00
-5,00
0,00
5,00
10,00
0,00 20,00 40,00 60,00 80,00
Excess Alpha, Spain (Domicile basis)
MorningstarSustainability Rating
Linéaire (MorningstarSustainability Rating)
XIX
Appendix 20: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the domicile of the Swedish funds
-2,00
0,00
2,00
4,00
6,00
8,00
10,00
12,00
14,00
0,00 20,00 40,00 60,00 80,00
Alpha, Sweden (Domicile basis)
PortfolioSustainability Score
Linéaire (PortfolioSustainability Score)
-8,00
-6,00
-4,00
-2,00
0,00
2,00
4,00
6,00
8,00
10,00
0,00 20,00 40,00 60,00 80,00
Excess Alpha, Sweden (Domicile basis)
PortfolioSustainability Score
Linéaire (PortfolioSustainability Score)
XX
Appendix 21: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the domicile of the Swiss funds
-25,00
-20,00
-15,00
-10,00
-5,00
0,00
5,00
10,00
15,00
20,00
0,00 20,00 40,00 60,00 80,00
Alpha, Switzerland (Domicile basis)
PortfolioSustainability Score
Linéaire (PortfolioSustainability Score)
-30,00
-25,00
-20,00
-15,00
-10,00
-5,00
0,00
5,00
10,00
0,00 20,00 40,00 60,00 80,00
Excess Alpha, Switzerland (Domicile basis)
PortfolioSustainability Score
Linéaire (PortfolioSustainability Score)
XXI
Appendix 22: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the domicile of the UK funds
-15,00
-10,00
-5,00
0,00
5,00
10,00
15,00
20,00
0,00 20,00 40,00 60,00 80,00
Alpha, United Kingdom (Domicile basis)
PortfolioSustainability Score
Linéaire (PortfolioSustainability Score)
-20,00
-15,00
-10,00
-5,00
0,00
5,00
10,00
0,00 20,00 40,00 60,00 80,00
Excess Alpha, United Kingdom (Domicile basis)
PortfolioSustainability Score
Linéaire (PortfolioSustainability Score)
XXII
Appendix 23: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the location of the management companies of the Austrian funds
-14,00
-12,00
-10,00
-8,00
-6,00
-4,00
-2,00
0,00
2,00
4,00
6,00
8,00
0,00 20,00 40,00 60,00 80,00
Alpha, Austria (ManCo basis)
ManCo Austria
Linéaire (ManCoAustria)
-7,00
-6,00
-5,00
-4,00
-3,00
-2,00
-1,00
0,000,00 20,00 40,00 60,00 80,00
Excess Alpha, Austria (ManCo basis)
EXCESS ALPHA
Linéaire (EXCESSALPHA)
XXIII
Appendix 24: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the location of the management companies of the Belgian funds
-50,00
0,00
50,00
100,00
150,00
200,00
0,00 10,00 20,00 30,00 40,00 50,00 60,00 70,00
Alpha, Belgium (ManCo basis)
ALPHA
Linéaire (ALPHA)
-50,00
0,00
50,00
100,00
150,00
200,00
0,00 20,00 40,00 60,00 80,00
Excess Alpha, Belgium (ManCo basis)
ALPHA
Linéaire (ALPHA)
XXIV
Appendix 25: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the location of the management companies of the Finnish funds
-10,00
-5,00
0,00
5,00
10,00
15,00
20,00
0,00 20,00 40,00 60,00 80,00
Alpha, Finland (ManCo basis)
ALPHA
Linéaire (ALPHA)
-15,00
-10,00
-5,00
0,00
5,00
10,00
15,00
0,00 20,00 40,00 60,00 80,00
Excess Alpha, Finland ( ManCo basis)
EXCESS ALPHA
Linéaire (EXCESSALPHA)
XXV
Appendix 26: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the location of the management companies of the French funds
-20,00
-15,00
-10,00
-5,00
0,00
5,00
10,00
15,00
20,00
0,00 20,00 40,00 60,00 80,00
Alpha, Fance (ManCo basis)
ManCo France
Linéaire (ManCoFrance)
-25,00
-20,00
-15,00
-10,00
-5,00
0,00
5,00
10,00
0,00 20,00 40,00 60,00 80,00
Excess Alpha, France (ManCo basis)
ManCo France
Linéaire (ManCoFrance)
XXVI
Appendix 27: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the location of the management companies of the German funds
-15,00
-10,00
-5,00
0,00
5,00
10,00
15,00
0,00 20,00 40,00 60,00 80,00
Alpha, Germany (ManCo basis)
ManCo Germany
Linéaire (ManCoGermany)
-20,00
-15,00
-10,00
-5,00
0,00
5,00
10,00
0,00 20,00 40,00 60,00 80,00
Excess Alpha, Germany (ManCo basis)
EXCESS ALPHA
Linéaire (EXCESSALPHA)
XXVII
Appendix 28: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the location of the management companies of the Italian funds
-4,00
-2,00
0,00
2,00
4,00
6,00
8,00
10,00
12,00
14,00
16,00
0,00 20,00 40,00 60,00 80,00
Alpha, Italy (ManCo basis)
ALPHA
Linéaire (ALPHA)
-10,00
-8,00
-6,00
-4,00
-2,00
0,00
2,00
4,00
6,00
8,00
10,00
0,00 20,00 40,00 60,00 80,00
Excess Alpha, Italy (ManCo basis)
EXCESS ALPHA
Linéaire (EXCESSALPHA)
XXVIII
Appendix 29: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the location of the management companies of the Dutch funds
-10,00
-8,00
-6,00
-4,00
-2,00
0,00
2,00
4,00
6,00
0,00 10,00 20,00 30,00 40,00 50,00 60,00 70,00
Alpha, Netherlands (ManCo basis)
ManCo Netherlands
Linéaire (ManCoNetherlands)
-6,00
-4,00
-2,00
0,00
2,00
4,00
6,00
8,00
10,00
12,00
0,00 10,00 20,00 30,00 40,00 50,00 60,00 70,00
Excess Alpha, Netherlands (ManCo basis)
ManCo Netherlands
Linéaire (ManCoNetherlands)
XXIX
Appendix 30: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the location of the management companies of the Norwegian funds
-20,00
-15,00
-10,00
-5,00
0,00
5,00
10,00
15,00
0,00 20,00 40,00 60,00 80,00
Alpha, Norway (ManCo basis)
ManCo Norway
Linéaire (ManCoNorway)
-25,00
-20,00
-15,00
-10,00
-5,00
0,00
5,00
10,00
0,00 20,00 40,00 60,00 80,00
Excess Alpha, Norway (ManCo basis)
Excess Alpha, Norway(ManCo basis)
Linéaire (Excess Alpha,Norway (ManCo basis))
XXX
Appendix 31: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the location of the management companies of the Spanish funds
-10,00
-5,00
0,00
5,00
10,00
15,00
0,00 20,00 40,00 60,00 80,00
Alpha, Spain (ManCo basis)
ManCo Spain
Linéaire (ManCo Spain)
-15,00
-10,00
-5,00
0,00
5,00
10,00
0,00 20,00 40,00 60,00 80,00
Excess Alpha, Spain (ManCo basis)
Excess Alpha, Spain(ManCo basis)
Linéaire (Excess Alpha,Spain (ManCo basis))
XXXI
Appendix 32: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the location of the management companies of the Swedish funds
-10,00
-5,00
0,00
5,00
10,00
15,00
0,00 20,00 40,00 60,00 80,00
Alpha, Sweden (ManCo basis)
ManCo Sweden
Linéaire (ManCoSweden)
-15,00
-10,00
-5,00
0,00
5,00
10,00
0,00 20,00 40,00 60,00 80,00
Excess Alpha, Sweden (ManCo basis)
Excess Alpha,Sweden (ManCobasis)
Linéaire (ExcessAlpha, Sweden(ManCo basis))
XXXII
Appendix 33: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the location of the management companies of the Swiss funds
-25,00
-20,00
-15,00
-10,00
-5,00
0,00
5,00
10,00
15,00
0,00 10,00 20,00 30,00 40,00 50,00 60,00 70,00
Alpha, Switzerland (ManCo basis)
ManCo Switzerland
Linéaire (ManCoSwitzerland)
-30,00
-25,00
-20,00
-15,00
-10,00
-5,00
0,00
5,00
10,00
0,00 20,00 40,00 60,00 80,00
Excess Alpha, Switzerland (ManCo basis)
Excess Alpha, Switzerland(ManCo basis)
Linéaire (Excess Alpha,Switzerland (ManCo basis))
XXXIII
Appendix 34: Alpha and excess alpha regressions with the Morningstar Portfolio Sustainable Score on basis of the location of the management companies of the UK funds
-20,00
-15,00
-10,00
-5,00
0,00
5,00
10,00
15,00
20,00
0,00 10,00 20,00 30,00 40,00 50,00 60,00 70,00
Alpha, United Kingdom (ManCo basis)
ManCo UK
Linéaire (ManCo UK)
-30,00
-25,00
-20,00
-15,00
-10,00
-5,00
0,00
5,00
10,00
15,00
0,00 20,00 40,00 60,00 80,00
Excess Alpha, United Kingdom (ManCo basis)
ManCo UK
Linéaire (ManCo UK)
XXXIV
Appendix 35: Alphas’ values and standard deviations, per country
DOMICILE Moyenne Standard deviation ManCO Moyenne
Standard deviation
Austria 1,67 3,54 Austria 1,60 3,87 Belgium 10,47 31,78 Belgium 8,17 23,20 Finland 3,56 6,84 Finland 5,76 5,79 France 2,01 4,29 France 1,84 4,67 Germany 1,63 3,84 Germany 2,19 4,59 Italy 4,43 3,10 Italy 4,80 4,85 Netherlands 6,01 2,37 Netherlands 3,50 3,14 Norway 0,68 6,85 Norway 0,85 6,75 Spain 0,35 3,59 Spain 0,86 3,59 Sweden 5,16 3,15 Sweden 2,73 3,85 Switzerland 3,38 7,91 Switzerland 2,10 4,94 UK 4,27 3,56 UK 1,16 7,25
Appendix 36: Excess alphas’ values and standard deviations, per country
DOMICILE Moyenne Standard deviation ManCO Moyenne
Standard deviation
Austria -3,88 3,54 Austria -4,04 3,87 Belgium 4,92 31,78 Belgium 2,01 23,17 Finland -1,99 6,84 Finland -0,85 5,63 France -3,54 4,29 France -3,99 4,58 Germany -3,92 3,84 Germany -3,84 4,55 Italy -1,12 3,10 Italy -1,20 4,95 Netherland 0,46 2,37 Netherland -3,14 3,02 Norway -4,87 6,85 Norway -5,29 6,29 Spain -5,20 3,59 Spain -6,20 3,59 Sweden -0,39 3,15 Sweden -3,69 3,59 Switzerland -2,17 7,91 Switzerland -3,90 4,84 UK -1,28 3,56 UK -4,77 7,14
XXXV
Appendix 37: Regression results, Alpha and country index (Domicile basis)
RAPPORT DÉTAILLÉ
Statistiques de la régression
Coefficient de détermination multiple 0,041772316Coefficient de détermination R^2 0,001744926Coefficient de détermination R^2 0,000708317Erreur-type 7,528343739Observations 965
ANALYSE DE VARIANCE
Degré de liberté Somme des carrés
Moyenne
des carrés F Valeur critique de F
Régression 1 95,40271681 95,4027168 1,68330131 0,194797077Résidus 963 54578,94895 56,6759594Total 964 54674,35167
Coefficients Erreur-type Statistique t Probabilité
Limite inférieure
pour seuil de
confiance = 95%
Limite supérieure pour
seuil de confiance =
95%
Limite inférieure
pour seuil de
confiance = 95,0%
Limite supérieure
pour seuil de
confiance = 95,0%
Constante 1,391837901 1,325683225 1,04990233 0,294026425 -1,209723224 3,993399027 -1,209723224 3,993399027Variable X 1 0,030178499 0,023260374 1,29742102 0,194797077 -0,015468368 0,075825365 -0,015468368 0,075825365
XX
XV
I
Appendix 38: Regression results, Excess Alpha and country index (Domicile basis)
RAPPORT DÉTAILLÉ
Statistiques de la régression
Coefficient de détermination multiple 0,041772316Coefficient de détermination R^2 0,001744926Coefficient de détermination R^2 0,000708317Erreur-type 7,528343739Observations 965
ANALYSE DE VARIANCE
Degré de liberté Somme des carrés
Moyenne
des carrés F Valeur critique de F
Régression 1 95,40271681 95,4027168 1,68330131 0,194797077Résidus 963 54578,94895 56,6759594Total 964 54674,35167
Coefficients Erreur-type Statistique t Probabilité
Limite inférieure
pour seuil de
confiance = 95%
Limite supérieure pour
seuil de confiance =
95%
Limite inférieure
pour seuil de
confiance = 95,0%
Limite supérieure
pour seuil de
confiance = 95,0%
Constante -4,158162099 1,325683225 -3,1366182 0,001760963 -6,759723224 -1,556600973 -6,759723224 -1,556600973Variable X 1 0,030178499 0,023260374 1,29742102 0,194797077 -0,015468368 0,075825365 -0,015468368 0,075825365
XX
XV
II
Appendix 39: Regression results, Alpha and country index (ManCo basis)
RAPPORT DÉTAILLÉ
Statistiques de la régression
Coefficient de détermination multiple 0,100426723Coefficient de détermination R^2 0,010085527Coefficient de détermination R^2 0,009386434Erreur-type 7,604510979Observations 1418
ANALYSE DE VARIANCE
Degré de liberté Somme des carrés
Moyenne
des carrés F Valeur critique de F
Régression 1 834,2702209 834,270221 14,42660561 0,000151897Résidus 1416 81885,27951 57,8285872Total 1417 82719,54973
Coefficients Erreur-type Statistique t Probabilité
Limite inférieure
pour seuil de
confiance = 95%
Limite supérieure pour
seuil de confiance =
95%
Limite inférieure
pour seuil de
confiance = 95,0%
Limite supérieure
pour seuil de
confiance = 95,0%
Constante 6,048671752 1,064221923 5,68365641 1,59852E-08 3,961050687 8,136292818 3,961050687 8,136292818Variable X 1 -0,069387723 0,018268402 -3,7982372 0,000151897 -0,105223764 -0,033551682 -0,105223764 -0,033551682
XX
XV
III
Appendix 40: Regression results, Excess Alpha and country index (ManCo basis)
RAPPORT DÉTAILLÉ
Statistiques de la régression
Coefficient de détermination multiple 0,100426723Coefficient de détermination R^2 0,010085527Coefficient de détermination R^2 0,009386434Erreur-type 7,604510979Observations 1418
ANALYSE DE VARIANCE
Degré de liberté Somme des carrés
Moyenne
des carrés F Valeur critique de F
Régression 1 834,2702209 834,270221 14,42660561 0,000151897Résidus 1416 81885,27951 57,8285872Total 1417 82719,54973
Coefficients Erreur-type Statistique t Probabilité
Limite inférieure
pour seuil de
confiance = 95%
Limite supérieure pour
seuil de confiance =
95%
Limite inférieure
pour seuil de
confiance = 95,0%
Limite supérieure
pour seuil de
confiance = 95,0%
Constante 0,498671752 1,064221923 0,46857873 0,639442911 -1,588949313 2,586292818 -1,588949313 2,586292818Variable X 1 -0,069387723 0,018268402 -3,7982372 0,000151897 -0,105223764 -0,033551682 -0,105223764 -0,033551682
XX
XIV
